\ HJ f UC-NRLF $B b35 0^^ Federal Revenue Act I GIFT OF Digitized by the Internet Archive in 2008 with funding from IVIicrosoft Corporation http://www.archive.org/details/federalrevenueacOOnatirich Federal Revenue Act of 1918 Complete Text Reference Notes, Tables and Index ' - # ' ^ •> National Bank of Commerce in New^ York February, 1919 \A %\2 11 < < t •. . « •» ««« « » • « o- f Foreword Federal taxes for both 1918 and 1919 are levied in the new Federal Revenue Act, thus making it possible for business men to know in advance what share of earnings the Government will require in taxes for the coming year. The new law contains distinct improvements over the Acts of 1916 and 1917, which it replaces. It consolidates scattered provisions relating to taxes on individual income and reUeves individuals and partnerships from the excess-profits tax. It also permits deduction of losses in transactions not di- rectly connected with trade or business and removes the limitation upon the deduction of interest upon indebtedness. In this book the National Bank of Commerce in New York presents the full text of the greatest revenue bill in history. A complete index, side- notes and tables are added to aid in the interpreta- tion of the statute and the computation of taxes. The service of our Income Tax Department is available to our friends in the explanation and ap- plication of the law. James S. Alexander, President. 393209 CONTENTS PAGE REVENUE ACT « I. General Definitions 5 II. Income Tax 8 III. War-Profits and Excess-Profits Tax . 69 IV. Estate Tax 87 V. Tax on Transportation and other Fa- cilities, and on Insurance 99 VI. Tax on Beverages 107 VII, Tax on Cigars, Tobacco, and Manu- factures Thereof 138 VIII. Tax on Admissions and Dues 141 IX. Excise Taxes 145 X. Special Taxes 154 XI. Stamp Taxes 170 XII. Tax on Employment of Child Labor. 182 XIII. General Administrative Provisions.. . 187 XIV. General Provisions 207 APPENDIX 213 Computation Tables for Individual Income Taxes 214 Computation Tables for Corporation Taxes 217 Comparison of Taxes on Corporations and on Partnerships 225 INDEX 227 * » >J, • ' " •....••.•.;,.::VHi'.HA REVENUE ACT Approved February 24» 1919 In effect February 25, 1919, except where otherwise herein specially provided [Public— No. 264 — 66th Congress] [H. R. 128631 An Act to provide revenue, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. TITLE I. General Definitions Sec. 1. That when used in this Act — The term "person" includes partnerships and cor- Persons porations as well as individuals ; The term "corporation" includes associations, CorporaHons joint-stock companies, and insurance companies; The term "domestic" when applied to a corpora- DomesHc tion or partnership means created or organized in the United States ; The term "foreign" when applied to a corporation Foreign or partnership means created or organized outside the United States ; « '• • * » • - • a-' « • • • United States •^ »• 3 «• * RsTSKUx Act Secretary Comnussioner Collector Revenue Act of 1916 Revenue Act of 1917 Taxpayer Government contract Informal contracts included The term "United States" when used in a geo- graphical sense includes only the States, the Terri- tories of Alaska and Hawaii, and the District of Columbia ; The term "Secretary" means the Secretary of the Treasury ; The term "Commissioner" means the Commis- sioner of Internal Revenue ; The term "collector" means collector of internal revenue ; The term "Revenue Act of 1916" means the Act entitled "An Act to increase the revenue, and for other purposes," approved September 8, 1916; The term "Revenue Act of 1917" means the Act entitled "An Act to provide revenue to defray war expenses, and for other purposes," approved Octo- ber 8, 1917; The term "taxpayer" includes any person, trust or estate subject to a tax imposed by this Act; The term "Gk)vernment contract" means (a) a contract made with the United States, or with any department, bureau, officer, commission, board, or agency, under the United States and acting in its behalf, or with any agency controlled by any of the above if the contract is for the benefit of the United States, or (b) a subcontract made with a contractor performing such a contract if the products or serv- ices to be furnished under the subcontract are for the benefit of the United States. The term "Gov- ernment contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclu- sive" when applied to a contract of the kind referred to in clause (a) of this paragraph, includes all such contracts which, although entered into during such period, were originally not enforceable, but which have been or may become enforceable by reason of subsequent validation in pursuance of law; Gexeral Dbfixitioxs The term "military or naval forces of the United Military or naval States" includes the Marine Corps, the Coast f<»^«sofu.s. Guard, the Army Nurse Corps, Female, and the Navy Nurse Corps, Female, but this shall not be deemed to exclude other units otherwise included within such term; The term "present war" means the war in which Present war the United States is now engaged against the Ger- man Government. For the purposes of this Act the date of the ter- Terminatien of war mination of the present war shall be fixed by proc- lamation of the President. Definitions Taxable year Fiscal year First taxable year Fiduciary Withholding agent Personal service corporation ^ TITLE II. Income Tax > PART I.— GENERAL PROVISIONS. Definitions. Sec. 200. That when used in this title— The term "taxable year" means the calendar year, or the jSseal year ending during such calendar year, upon the basis of which the net income is computed under section 212 or section 232. The term **fiscal year" means an accounting period of twelve months ending on the last day of any month other than De- cember. The first taxable year, to be called the taxable year 1918, shall be the calendar year 1918 or any fiscal year ending during the calendar year 1918; The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for anv person, trust or estate ; The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of section 221 or section 237; The term "personal service corporation" means a corporation whose income is to be ascribed primarily to the activities of the principal o^\Tiers or stock- holders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor; but does not include any foreign corporation, nor any cor- Ik COME Tax 9 poration 50 per centum or more of whose gross in- come consists either ( 1 ) of gains, profits, or income derived from trading as a principal, or ( 2 ) of gains, profits, commissions, or other income, derived from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive ; The term "paid," for the purposes of the deduc- P"<* tions and credits under this title, means "paid or accrued" or "paid or incurred," and the terms "paid Paid or accrued or incurred" and "paid or accrued" shall be con- ^ strued according to the method of accounting upon the basis of which the net income is computed under section 212. Dividends. Sec. 201. (a) That the term "dividend" when Diridends: used in this title (except in paragraph (10) of sub- division (a) of section 234 ) means (1) anvdistribu- ,,, , ^ J \ .11*^ (v of corporahons tion made by a corporation, other than a personal service corporation, to its shareholders or members, whether in cash or in other property or in stock of the corporation, out of its earnings or profits accu- mulated since February 28, 1913, or (2) any such (2) of personal distribution made by a personal service corporation »««•▼»<:« corporaHons out of its earnings or profits accumulated since Feb- ruary 28, 1913, and prior to January 1, 1918. (b) Any distribution shall be deemed to have Deemed to be from been made from earnings or profits unless all earn- ****^** earnings ings and profits have first been distributed. Any distribution made in the year 1918 or any year there- after shall be deemed to have been made from earn- ings or profits accumulated since February 28, 1913, or, in the case of a personal service corporation, from the most recently accumulated earnings or profits; but any earnings or profits accumulated prior to March 1, 1913, may be distributed in stock fj^Jc^hlTois"''' dividends or otherwise, exempt from the tax, after exemrt*^ ' 10 Rev£ku£ Act Stock diyidends liquidation dividends, taxability of Ratet applicable to stock dividends Earnings from which distribution is made the earnings and profits accumulated since Febru- ary 28, 1913, have been distributed. (c) A dividend paid in stock of the corporation shall be considered income to the amount of the earnings or profits distributed. Amounts distrib- uted in the liquidation of a corporation shall be treated as payments in exchange for stock or shares, and any gain or profit realized thereby shall be taxed to the distributee as other gains or profits. (d) If any stock dividend (1) is received by a taxpayer between January 1 and November 1, 1918, both dates inclusive, or (2) is during such period bona fide authorized or declared, and entered on the books of the corporation, and is received by a tax- payer after November 1, 1918, and before the ex- piration of thirty days after the passage of this act, then such dividend shall, in the manner provided in section 206, be taxed to the recipient at the rates prescribed by law for the years in which the corpora- tion accumulated the earnings or profits from which such dividend was paid, but the dividend shall be deemed to have been paid from the most recently accumulated earnings or profits. (e) Any distribution made during the first sixty days of any taxable year shall be deemed to have been made from earnings or profits accumulated during preceding taxable years; but any distribu- tion made during the remainder of the taxable year shall be deemed to have been made from earnings or profits accumulated between the close of the pre- ceding taxable year and the date of distribution, to the extent of such earnings or profits, and if the books of the corporation do not show the amount of such earnings or profits, the earnings or profits for the accounting period within which the distribution was made shall be deemed to have been accumulated ratably during such period. IncomeTax ** Basis For Determining Gain or Loss. Sec. 202 (a). That for the purpose of ascertain- Sale of property: ing the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be — (1) In the case of property acquired before ^^;^7f^^^^ March 1, 1913, the fair market price or value of such property as of that date; and (2) In the case of property acquired on or after ^^^^^^ ^^ that date, the cost thereof; or the inventory value, if the inventory is made in accordance with section 203. (b) When property is exchanged for other prop- ^xchango of property erty, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair m^r- ^^^^^^^^^^^^ ^^ ket value, if any; but when m connection with the ge„.ndcon«oiid.tioni reorganization, merger, or consolidation of a cor- poration a person receives in place of stock or secur- ities owned by him new stock or securities of no greater aggregate par or face value, no gain or loss shall be deemed to occur from the exchange, and the new stock or securities received shall be treated as taking the place of the stock, securities, or property exchanged. When in the case of any such reorganization, .^^^^^J^* merger or consolidation the aggregate par or face value of the new stock or securities received is in excess of the aggregate par or face value of the stock or securities exchanged, a like amount in par or face value of the new stock or securities received shall be treated as taking the place of the stock or securities exchanged, and the amount of the excess in par or face value shall be treated as a gain to the extent that the fair market value of the new stock or securi- ties is greater than the cost (or if acquired prior to 13 R E VE K UE A CT Inventories basis of Net losses: (1) from business operations (2) from sale of war- production plant and equipment Net loss defined Deduction of net losses March 1, 1913, the fair market value as of that date) of the stock or securities exchanged. Inventories. Sec. 203. That whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any tax- payer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, \vith the ap- proval of the Secretary, may prescribe as conform- ing as nearly as may be to the best accounting prac- tice in the trade or business and as most clearly reflecting the income. Net Losses. Sec. 204 (a) That as used in this section the term "net loss" refers only to net losses resulting from either (1) the operation of any business regularly carried on by the taxpayer, or (2) the bona fide sale by the taxpayer of plant, buildings, machinery, equipment or other facilities, constructed, installed or acquired by the taxpayer on or after April 6, 1917, for the production of articles contributing to the prosecution of the present war; and when so resulting means the excess of the deductions allowed by law (excluding in the case of corporations amounts allowed as a deduction under paragraph (6) of subdivision (a) of section 234 ) over the sum of the gross income plus any interest received free from taxation both under this title and under Title III. (b) If for any taxable year beginning after October 31, 1918, and ending prior to January 1, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount of such net loss shall under regulations prescribed by the Commis- I N COME Tax 18 sioner with the approval of the Secretary be de- ducted from the net income of the taxpayer for the preceding taxable year ; and the taxes imposed bv „ j . . , 7i • ••■1 11 m«. 1 TTT n -, T. Kedelerminabon of this title and by Title III for such preceding tax- tax able year shall be redetermined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermination shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. If such net loss is in excess of the net income for such preceding taxable year, the amount of such excess shall under regu- lations prescribed by the Commissioner with the approval of the Secretary be allowed as a deduction in computing the net income for the succeeding taxable year. (c) The benefit of this section shall be allowed Net losses of part- to the members of a partnership and the beneficiaries "«"*"p« *"<* ««*»*•» of an estate or trust under regulations prescribed by the Commissioner with the approval of the Secre- tary. Fiscal Year With Di£Ferent Rates. Sec. 205. (a) That if a taxpayer makes return Tax for fiscal year for a fiscal year beginning in 1917 and ending in ^£"„^J9,8^^^""'* 1918, his tax under this title for the first taxable year shall be the sum of: (1) the same proportion of a tax for the entire period computed under Title I of the Revenue Act of 1916 as amended by the Reve- nue Act of 1917 and under Title I of the Revenue Act of 1917, which the portion of such period fall- ing within the calendar year 1917 is of the entire period, and (2) the same proportion of a tax for the H entire period computed under this title at the rates for the calendar year 1918 which the portion of such period falling within the calendar year 1918 is of the entire period ; Provided, That in the cstse of a per- sonal service corporation the amount to be paid shall be only that specified in clause (1). u Re v£ir US Act Credit for Ux paid under ReTenue Acts of 1916 and 1917 Tax for fiscal year beginning in 1918 and ending in 1919 Fiscal year of partnership Any amount heretofore or hereafter paid on ac- count of the tax imposed for such fiscal year by Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917, and by Title I of the Revenue Act of 1917, shall be credited towards the payment of the tax imposed for such fiscal year by this Act, and if the amount so paid exceeds the amount of such tax imposed by this Act, or, in the case of a personal service corporation, the amount specified in clause (1), the excess shall be credited or re- funded in accordance with the provisions of section 252. (b) If a taxpayer makes a return for a fiscal year beginning in 1918 and ending in 1919, the tax under this title for such fiscal year shall be the sum of: (1) the same proportion of a tax for the entire period computed under this title at the rates speci- fied for the calendar year 1918 which the portion of such period falling within the calendar year 1918 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title at the rates specified for the calendar year 1919 which the portion of such period falling within the calendar year 1919 is of the entire period. (c) If a fiscal year of a partnership begins in 1917 and ends in 1918 or begins in 1918 and ends in 1919, then notwithstanding the provisions of subdi- vision (b) of section 218, (1) the rates for the cal- endar year during which such fiscal year begins shall apply to an amount of each partner's share of such partnership net income (determined under the law applicable to such year) equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year, and (2) the rates for the calendar year during which such fiscal year ends shall apply to an amount of each partner's share of such partnership net income (de- IkcomeTax 15 termined under the law applicable to such calendar year) equal to the proportion which the part of such fiscal year falhng within such calendar year bears to the full fiscal year ; Provided, That in the case of a personal service corporation with respect to a fiscal year beginning in 1917 and ending in 1918, the amount specified in clause (1) shall not be subject to normal tax. Parts of Income Subject to Rates for Different Years Sec 206. That whenever parts of a taxpayer's Method of applying income are subject to rates for different calendar »« rate* to allocated years, the part subject to the rates for the most recent calendar year shall be placed in the lower brackets of the rate schedule provided in this title, the part subject to the rates for the next preceding calendar year shall be placed in the next higher brackets of the rate schedule applicable to that year, ^nd so on until the entire net income has been ac- counted for. In determining the income, any de- Method of applying ductions, exemptions or credits of a kind not plainly deductions and properly chargeable against the income taxable at rates for a preceding year shall first be applied against the income subject to rates for the most recent calendar year; but any balance thereof shall be applied against the income subject to the rates of the next preceding year or years until fully al- lowed. PART IL— INDIVIDUALS. Normal Tax. Sec. 210. That, in lieu of the taxes imposed by subdivision (a) of section 1 of the Revenue Act of 1916 and by section 1 of the Revenue Act of 1917, there shall be levied, collected, and paid for each Normal tax on indiyiduals 16 RxvsyuE Act Rates for 1918 Rates for succeeding years Surtax rates taxable year upon the net income of every individual ^ normal tax, at the following rates :* (a) For the calendar year 1918, 12 per centum of the amount of the net income in excess of the credits provided in section 216; Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 6 per centum; (b) For each calendar year thereafter, 8 per centum of the amount of the net income in excess of the credits provided in section 216; Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 4 per centum. Surtax. Sec. 211. (a) That, in lieu of the taxes im- posed by subdivision (b) of section 1 of the Revenue Act of 1916 and by section 2 of the Revenue Act of 1917, but in addition to the normal tax imposed by section 210 of this Act, there shall be levied, col- lected, and paid for each taxable year upon the net income of every individual, a surtax equal to the sum of the following:* 1 per centum of the amount by which the net in- come exceeds $5,000 and does not exceed $6,000; 2 per centum of the amount by which the net in- come exceeds $6,000 and does not exceed $8,000; 3 per centum of the amount by which the net in- come exceeds $8,000 and does not exceed $10,000; 4 per centum of the amount by which the net in- come exceeds $10,000 and does not exceed $12,000; 5 per centum of the amount by which the net in- come exceeds $12,000 and does not exceed $14,000; *See table, pa^i 215. Ikcome Tax ^"^ 6 per centum of the amount by which the net in- Surtax rate« come exceeds $14,000 and does not exceed $16,000; *^®"**""® 7 per centum of the amount by which the net in- come exceeds $16,000 and does not exceed $18,000; 8 per centum of the amount by which the net in- come exceeds $18,000 and does not exceed $20,000; 9 per centum of the amount by which the net in- come exceeds $20,000 and does not exceed $22,000; 10 per centum of the amount by which the net in- come exceeds $22,000 and does not exceed $24,000 ; 11 per centum of the amount by which the net in- come exceeds $24,000 and does not exceed $26,000; 12 per centum of the amount by which the net in- come exceeds $26,000 and does not exceed $28,000; 13 per centum of the amount by which the net in- come exceeds $28,000 and does not exceed $30,000; 14 per centum of the amount by which the net in- come exceeds $30,000 and does not exceed $32,000; 15 per centum of the amount by which the net in- come exceeds $32,000 and does not exceed $34,000 ; 16 per centum of the amount by which the net in- come exceeds $34,000 and does not exceed $36,000; 17 per centum of the amount by which the net in- come exceeds $36,000 and does not exceed $38,000; 18 per centum of the amount by which the net in- come exceeds $38,000 and does not exceed $40,000; . 19 per centum of the amount by which the net in- come exceeds $40,000 and does not exceed $42,000 ; 20 per centum of the amount by which the net in- come exceeds $42,000 and does not exceed $44,000 ; 21 per centum of the amount by which the net in- come exceeds $44,000 and does not exceed $46,000 ; 22 per centum of the amount by which the net in- come exceeds $46,000 and does not exceed $48,000 ; 23 per centimi of the amount by which the net in- come exceeds $48,000 and does not exceed $50,000; 18 llsVEliUBACT Surtax raici 24 per cciitum of the amount by which the net in conUnucd ^^^^ exeeeds $50,000 and does not exceed $52,000 25 per centum of the amount by which the net in come exceeds $52,000 and does not exceed $54,000 26 per centum of the amount by which the net in come exceeds* $54,000 and does not exceed $56,000 27 per centum of the amount by which the net in come exceeds $56,000 and does not exceed $58,000 28 per centum of the amount by which the net in come exceeds $58,000 and does not exceed $60,000 29 per centum of the amount by which the net in come exceeds $60,000 and does not exceed $62,000 30 per centum of the amount by which the net in come exceeds $62,000 and does not exceed $64,000 31 per centum of the amount by which the net in come exceeds $64,000 and does not exceed $66,000 32 per centum of the amount by which the net in come exceeds $66,000 and does not exceed $68,000 33 per centum of the amount by which the net in come exceeds $68,000 and does not exceed $70,000 34 per centum of the amount by which the net in come exceeds $70,000 and does not exceed $72,000 35 per centum of the amount by which the net in come exceeds $72,000 and does not exceed $74,000 36 per centum of the amount by which the net in come exceeds $74,000 and does not exceed $76,000 37 per centum of the amount by which the net in come exceeds $76,000 and does not exceed $78,000 38 per centimi of the amount by which the net in come exceeds $78,000 and does not exceed $80,000 39 per centum of the amount by which the net in come exceeds $80,000 and does not exceed $82,000 40 per centum of the amount by which the net in come exceeds $82,000 and does not exceed $84,000 41 per centum of the amount by which the net in come exceeds $84,000 and does not exceed $86,000 IifcoME Tax 19 42 per centum of the amount by which the net in- Surtax rates come exceeds $86,000 and does not exceed $88,000; ^«"*'""«*' 43 per centum of the amount by which the net in- come exceeds $88,000 and does not exceed $90,000 ; 44 per centum of the amount by which the net in- come exceeds $90,000 and does not exceed $92,000; 45 per centum of the amount by which the net in- come exceeds $92,000 and does not exceed $94,000; 46 per centum of the amount by which the net in- come exceeds $94,000 and does not exceed $96,000 ; 47 per centum of the amount by which the net in- come exceeds $96,000 and does not exceed $98,000 ; 48 per centum of the amount by which the net in- come exceeds $98,000 and does not exceed $100,000; 52 per centum of the amount by which the net in- come exceeds $100,000 and does not exceed $150,- 000 ; 56 per centum of the amount by which the net in- come exceeds $150,000 and does not exceed $200,- >00; 60 per centum of the amount by which the net in- come exceeds $200,000 and does not exceed $300,- [OOO; 63 per centum of the amount by which the net in- come exceeds $300,000 and does not exceed $500,- >00 ; 64 per centum of the amount by which the net in- come exceeds $500,000 and does not exceed $1,000,- 000; 65 per centum of the amount by which the net in- come exceeds $1,000,000. (b) In the case of a bona fide sale of mines, oil Mines and wells, or ffas wells, or any interest therein, where the prin- :'"" ** *? ** '^''i ^"s .*^'»' 111 1 income from sale ol cipal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed 20 Re vcK UE Act Net income defined Accounting period Accounting methods Changes in accounting period Income subject to tax by this section attributable to such sale shall not ex- ceed 20 per centum of the selUng price of such prop- erty or interest. Net Income Defined. Sec. 212.»(a) That in the case of an individual the term "net income" means the gross income as defined in section 213, less the deductions allowed by section 214. (b) The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so em- ployed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year. If a taxpayer changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commis- sioner, be computed on the basis of such new ac- counting period, subject to the provisions of section 226. Gross Income Defined. Sec. 213. That for the purposes of this title (ex- cept as otherwise provided in section 233) the term "gross income" — (a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal IncomeTax 21 service (including in the case of the President of the United States, the judges of the Supreme and In- ferior Courts of the United States, and all other officers and employees, whether elected or ap- pointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such), of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property ; also from interest, rent, dividends, securities, or the transaction of any busi- ness carried on for gain or profit, or gains or profits and income derived from any source whatever. The amount of all such items shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of account- ing permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period; but (b) Does not include the following items, which Jnc®*"® e'^^'^pi shall be exempt from taxation under this title: (1) The proceeds of Ufe insurance policies paid P'*®ceeds of Ufe upon the death of the insured to individual benefi- ciaries or to the estate of the insured; (2) The amount received by the insured as a re- Return of life turn of premium or premiums paid by him under »"»"*^*nce p^®™'"'"^ life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract ; (3) The value of property acquired by gift, be- G'fi* and Quests quest, devise, or descent (but the income from such property shall be included in gross income) ; (4) Interest upon (a) the obligations of a State, Territory, or any political subdivision thereof, or 22 Revenue Act Interest on State, Municipal, Federal Farm Loan, U. S. and War Finance Corpor- ation bonds Exemption limited Income of foreign governments Compensation under workmen's com- pensation acts Income of political subdivisions of the U.S. the District of Columbia; or (b) securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916; or (c) the obligations of the United States or its possessions; or (d) bonds issued by the War^Finance Corporation ; Provided, That every person owning any of the obligations, securi- ties or bonds enumerated in clauses (a), (b), (c), and (d) shall, in the return required by this title, submit a statement showing the number and amount of such obUgations, securities and bonds owned by him and the income received therefrom, in such form and with such information as the Commissioner may require. In the case of obligations of the United States issued after September 1, 1917, and in the case of bonds issued by the War Finance Corporation, the interest shall be exempt only if and to the extent provided in the respective Acts authorizing the issue thereof as amended and sup- plemented, and shall be excluded from gross income only if and to the extent it is wholly exempt from taxation to the taxpayer both under this title and under Title III; (5) The income of foreign govermnents re- ceived from investments in the United States in stocks, bonds, or other domestic securities, o^vned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments, or from any other source within the United States; (6) Amounts received, through accident or health insurance or under workmen's compensation acts, as compensation for personal injuries or sick- ness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; (7) Income derived from any pubhc utility or the exercise of any essential governmental function IncomeTax 2S and accruing to any State, Territory, or the District of Columbia, or any political subdivision of a State or Territory, or income accruing to the government of any possession of the United States, or any polit- ical subdivision thereof. Whenever any State, Territory, or the District income from public of Columbia, or any political subdivision of a State burde^n poUtkal" or Territory, prior to September 8, 1916, entered subdivisions in good faith into a contract with any person, the object and purpose of which is to acquire, con- struct, operate, or maintain a pubhc utility, no tax shall be levied under the provisions of this title upon the income derived from the operation of such public utiUty, so far as the payment thereof will impose a loss or burden upon such State, Territory, District of Columbia, or political subdivision; but this pro- vision is not intended to confer upon such person any financial gain or exemption or to reheve such person from the payment of a tax as provided for in this title upon the part or portion of such income to which such person is entitled under such contract ; (8) So much of the amount received during the Compensation of present war by a person in the military or naval Pf^sons m active ser- f' i?j.iTr-4.JC'4-i. 1 vice during present lorces ot the United htates as salary or compensa- ^„ tion in any form from the United States for active services in such forces as does not exceed $3,500. (c) In the case of nonresident alien individuals. Nonresident aliens, gross income includes only the gross income from g«^oss income of sources within the United States, including interest on bonds, notes, or other interest- bearing obliga- tions of residents, corporate or otherwise, dividends from resident corporations, and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. 24 Re VEKUE Act Deductions: Business expenses Interest Taxes psid or accrued in taxable year Deductions Allowed. Sec. 214. (a) That in computing net income there shall be allowed as deductions : (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allow- ance for salaries or other compensation for personal services actually rendered, and including rentals or other pajrments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the tax- payer has not taken or is not taking title or in which he has no equity; (2) All interest paid or accrued within the tax- able year on indebtedness, except on indebtedness incurred or continued to purchase or carry obhga- tions or securities (other than obligations of the United States issued after September 24, 1917), the interest upon which is wholly exempt from tax- ation under this title as income to the taxpayer, or, in the case of a nonresident alien individual, the pro- portion of such interest which the amount of his gross income from sources within the United States bears to the amount of his gross income from all sources within and without the United States; (3) Taxes paid or accrued within the taxable year imposed (a) by the authority of the United States, except income, war profits and excess-profits taxes; or (b) by the authority of any of its posses- sions, except the amount of income, war profits and excess-profits taxes allowed as a credit under sec- tion 222; or (c) by the authority of any State or Territory, or any county, school district, municipal- ity, or other taxing subdivision of any State or Ter- ritory, not including those assessed against local benefits of a kind tending to increase the value of the property assessed; or (d) in the case of a citizen or IncomeTax 26 resident of the United States, by the authority of any foreign country, except the amount of income, war-profits and excess-profits taxes allowed as a credit under section 222; or (e) in the case of a nonresident alien individual, by the authority of any foreign country (except income, war-profits and excess-profits taxes, and taxes assessed against local benefits of a kind tending to increase the value of the property assessed), upon property or busi- ness; (4) Losses sustained during the taxable year Losses and not compensated for by insurance or otherwise, if incurred in trade or business ; (5) Losses sustained during the taxable year Losses not con- and not compensated for by insurance or otherwise, nected with trade if incurred in any transaction entered into for profit, though not connected with the trade or business ; but in the case of a nonresident alien individual only as to such transactions vdthin the United States; (6) Losses sustained during the taxable year of Losses from fire, property not connected with the trade or business ca*"»i*y» ^^^^^* «tc- (but in the case of a nonresident alien individual only property within the United States) if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insurance or otherwise; (7) Debts ascertained to be worthless and Worthless debts charged off within the taxable year ; (8) A reasonable allowance for the exhaustion, Depreciation and wear and tear of property used in the trade or busi- obso'^cence ness, including a reasonable allowance for obsoles- cence ; (9) In the case of buildings, machinery, equip- AmorHzation of ment, or other facilities, constructed, erected, in- faoJtJef f"'' ^ar stalled, or acquired, on or after April 6, 1917, for the production of articles contributing to the prose- cution of the present war, and in the case of vessels 26 R E VE X UE A<:t Depletion of mineral resources or timber constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amortization of such part^of the cost of such facilities or vessels as has been borne by the taxpayer, but not again in- cluding any amount otherwise allowed under this title or previous Acts of Congress as a deduction in computing net income. At any time within three years after the termination of the present war, the Commissioner may, and at the request of the tax- payer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evi- dence that the deduction originally allowed was in- correct, the taxes imposed by this title and by Title III for the year or years affected shall be redeter- mined; and the amount of tax due upon such rede- termination, if any, shall be paid upon notice and demand by the collector, or the amount of tax over- paid, if any, shall be credited or refunded to the tax- payer in accordance with the provisions of section 252; (10) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allow- ance for depletion and for depreciation of improve- ments, according to the peculiar conditions in each case, based upon cost including cost of development not otherwise deducted ; Provided, That in the case of such properties acquired prior to March 1, 1913, the fair market value of the property (or the tax- payer's interest therein) on that date shall be taken in lieu of cost up to that date; Provided further. That in the case of mines, oil and gas wells, discov- ered by the taxpayer, on or after INIarch 1, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the property is materially disproportionate to IncomeTax 27 the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within thirty days thereafter; such reasonable allowance in all the above cases to be made under rules and regulations to be pre- scribed by the Commissioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably appor- tioned between the lessor and lessee; ( 11 ) Contributions or gifts made within the tax- Contributions and able year to corporations organized and operated ^•^** exclusively for rehgious, charitable, scientific, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any pri- vate stockholder or individual, or to the special fund for vocational rehabilitation authorized by section 7 of the Vocational Rehabilitation Act, to an amount not in excess of 15 per centum of the tax- payer's net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commis- sioner, with the approval of the Secretary. In the case of a nonresident alien individual this deduction shall be allowed only as to contributions or gifts made to domestic corporations, or to such vocational rehabilitation fund ; (12) (a) At the time of filing return for the Claim in abatement: taxable year 1918 a taxpayer may file a claim in abatement based on the fact that he has sustained a substantial loss (whether or not actually realized by sale or other disposition) resulting from any ma- l^„ f^om shrinkage terial reduction (not due to temporary fluctuation) of inventory value* of the value of the inventory for such taxable year, or from the actual payment after the close of such Loss from payment of taxable year of rebates in pursuance of contracts rebate 28 Revenue Act Security Deduction of net lots Redetermination of tax in case no claim has been filed Nonresident aliens: deductions allowed only to extent con- nected with income from U. S. entered into during such year upon sales made dur- ing such year. In such case payment of the amount of the tax covered by such claim shall not be re- quired until the claim is decided, but the taxpayer shall accomp5,ny his claim with a bond in double the amount of the tax covered by the claim, with sureties satisfactory to the Commissioner, condi- tioned for the payment of any part of such tax found to be due, with interest. If any part of such claim is disallowed then the remainder of the tax due shall on notice and demand by the collector be paid by the taxpayer with interest at the rate of 1 per centum per month from the time the tax would have been due had no such claim been filed. If it is shown to the satisfaction of the Commissioner that such substantial loss has been sustained, then in computing the tax imposed by this title the amount of such loss shall be deducted from the net income. (b) If no such claim is filed, but it is shown to the satisfaction of the Commissioner that during the taxable year 1919 the taxpayer has sustained a sub- stantial loss of the character above described then the amount of such loss shall be deducted from the net income for the taxable year 1918 and the tax imposed by this title for such year shall be redeter- mined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermina- tion shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. (b) In the case of a nonresident alien individual the deductions allowed in paragraphs (1), (4), (7), (8), (9), (10), (12), and clause (e) of para- graph (3), of subdivision (a) shall be allowed only if and to the extent that thev are connected with income arising from a source within the United States; and the proper apportionment and alloca- tion of the deductions with respect to sources of in- IncomeTax 29 come within and without the United States shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secre- tary. Items Not Deductible. Sec. 215. That in computing net income no de- duction shall in any case be allowed in respect of — (a) Personal, living, or family expenses; Uving expenses ( b ) Any amount paid out for new buildings or Capital invesimenu for permanent improvements or betterments made to increase the value of any property or estate ; (c) Any amount expended in restoring property Cosi of restoring or in making good the exhaustion thereof for which property an allowance is or has been made ; or (d) Premiums paid on any life insurance policy insurance carried covering the life of any officer or employee, or of for officers or cm* any person financially interested in any trade or p^^*®* business carried on by the taxpayer, when the tax- payer is directly or indirectly a beneficiary under such policy. Credits Allowed. Sec. 216. That for the purpose of the normal tax Credits allowed for only there shall be allowed the following credits : n®"^""* **'^* (a) The amount received as dividends from a cor- Dividends poration which is taxable under this title upon its net income, and amounts received as dividends from a personal service corporation out of earnings or profits upon which income tax has been imposed by Act of Congress; (b) The amount received as interest upon obliga- interest on bonds tions of the United States and bonds issued by the of u. s. and War War Finance Corporation, which is included in P^^^"" Corporation gross income under section 213; (c) In the case of a single person, a personal ex- Personal emption of $1,000, or in the case of the head of a exemption family or a married person living with husband or so Revenue Act Eiemption for dependent Conditional ei- emption to non* resident aliens \ Deductions and credits allowed only if returns are filed wife, a personal exemption of $2,000. A husband and wife living together shall receive but one per- sonal exemption of $2,000 against their aggregate net income; and in case they make separate re- turns, the personal exemption of $2,000 may be taken by either or divided between them ; (d) $200 for each person (other than husband or wife) dependent upon and receiving his chief sup- port from the taxpayer, if such dependent person is under eighteen years of age or is incapable of self- support because mentally or physically defective. (e)In the case of a nonresident alien individual who is a citizen or subject of a country which im- poses an income tax, the credits allowed in subdivi- sions (c) and (d) shall be allowed only if such country allows a similar credit to citizens of the United States not residing in such country. Nonresident Aliens — Allowance of Deductions and Credits. Sec. 217. That a nonresident alien individual shall receive the benefit of the deductions and cred- its allowed in this title only by filing or causing to be filed with the collector a true and accurate return of his total income received from all sources corpor- ate or otherwise in the United States, in the manner prescribed by this title, including therein all the in- formation which the Conmiissioner may deem nec- essary for the calculation of such deductions and credits; Provided, That the benefit of the credits al- lowed in subdivisions (c) and (d) of section 210 may, in the discretion of the Commissioner, and ex- cept as otherwise provided in subdivision (e) of that section be received by filing a claim therefor with the withholding agent. In case of failure to file a return, the collector shall collect the tax on such income, and all property belonging to such IkcomsTax si nonresident alien individual shall be liable to dis- traint for the tax. Partnerships and Personal Service Corporations. Sec. 218. (a) That individuals carrying on busi- Members taxed as ness in partnership shall be liable for income tax individuals only in their individual capacity. There shall be in- cluded in computing the net income of each partner ^ his distributive share, whether distributed or not, of ,, . , , . /» . 1 . i_ • i» . 1 . 1 1 Net income includes the net mcome oi the partnership tor the taxable earnings whether year, or, if his net income for such taxable year is distributed or not computed upon the basis of a period different from that upon the basis of which the net income of the partnership is computed, then his distributive share of the net income of the partnership for any ac- counting period of the partnership ending within the fiscal or calendar year upon the basis of which the partner's net income is computed. The partner shall, for the purpose of the normal Credits allowed tax, be allowed as credits, in addition to the credits members allowed to him under section 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the part- nership. (b) If a fiscal year of a partnership ends during a Partnership calendar year for which the rates of tax differ from fi»cai year those for the preceding calendar year, then (1) the rates for such preceding calendar year shall apply to an amount of each partner's share of such part- nership net income equal to the proportion which the part of such fiscal year falling within such cal- endar year bears to the full fiscal year, and (2) the rates for the calendar year during which such fiscal year ends shall apply to the remainder. (c) In the case of an individual member of a Deduction of excess paii:nership which makes return for a fiscal year ^^.^J^J^^^^^^^^ beginning in 1917 and ending in 1918, his propor- S2 Revenue Act Net income of part- nership Personal lerrice corporations Stockholders taxed as members of part- nerships Taxable on both distributed and un- distributed earnings Taxable income: Received during administration tionate share of any excess profits tax imposed upon the partnership under the Revenue Act of 1917 with respect to that part of such fiscal year falling in 1917, shall, for the purpose of determining the tax imposed by this title, be credited against that portion of the net income embraced in his personal return for the taxable year 1918 to which the rates for 1917 apply. (d) The net income of the partnersliip shall be computed in the same manner and on the same basis as provided in section 212, except that the deduc- tion provided in paragraph (11) of subdivision (a) of section 214 shall not be allowed. (e) Personal service corporations shall not be subject to taxation under this title, but the individ- ual stockholders thereof shall be taxed in the same manner as the members of partnerships. All the provisions of this title relating to partnerships and the members thereof shall so far as practicable ap- ply to personal service corporations and the stock- holders thereof; Provided, That for the purpose of this subdivision amounts distributed by a personal service corporation during its taxable year shall be accounted for by the distributees; and any portion of the net income remaining undistributed at the close of its taxable year shall be accounted for by the stockliolders of such corporation at the close of its taxable year in proportion to their respective shares. Estates and Trusts. Sec. 219. (a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including — (1) Income received by estates of deceased per- sons during the period of administration or settle- ment of the estate ; IircoMs Tax 33 (2) Income accumulated in trust for the benefit ccumuiaied in iruti of unborn or unascertained persons or persons with contingent interests; (3) Income held for future distribution under Held for future the terms of the will or trust; and di.iribution (4) Income which is to be distributed to the bene- Distributed ficiaries periodically, whether or not at regular in- p«" calendar year of the Commissioner, changes the basis of comput- ing net income from fiscal year to calendar year a I separate return shall be made for the period be- tween the close of the last fiscal year for which re- turn was made and the following December 31. If the change is from calendar year to fiscal year, a Change from calendar separate return shall be made for the period* be- *®fi«caiyear tween the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. If a taxpayer mak- »ing his first return for income tax keeps his accounts on the basis of a fiscal year he shall make a separate return for the period between the beginning of the calendar year in which such fiscal year ends and ► the end of such fiscal year. In all of the above cases the net income shall be Computation of net computed on the basis of such period for which sep- '"^•"® arate return is made, and the tax shall be paid there- on at the rate for the calendar year in which such period is included ; and the credits provided in sub- divisions (c) and (d) of section 216 shall be re- duced respectively to amounts which bear the same ratio to the full credits provided in such subdivi- sions as the number of months in such period bears to twelve months. Rkvkvus Act When return! must be 61ed Extension of time for filing Where returns must be filed Time and Place for Filing Returns. Sec. 227. (a) That returns shall be made on or before the fifteenth day of the third month follow- ing the close of the fiscal year, or, if the return is made on the basis of the calendar year, then the return shall be made on or before the fifteenth day of March, The Commissioner may grant a reason- able extension of time for filing returns whenever in his judgment good cause exists and shall keep a record of every such extension and the reason therefor. Except in the case of taxpayers who are abroad, no such extension sliall be for more than six months. (b) Returns shall be made to the collector for the district in which is located the legal residence or principal place of business of the person making the return, or, if he has no legal residence or principal place of business in the United States, then to the collector at Baltimore, Maryland. Correction Understatement in Returns. Sec. 228. That if the collector or deputy collector has reason to believe that the amount of any income returned is understated, he shall give due notice to the taxpayer making the return to show cause why the amount of the return should not be increased, and upon proof of the amount understated, may increase the same accordingly. Such taxpayer may furnish sworn testimony to prove any relevant facts and if dissatisfied with the decision of the collector may appeal to the Commissioner for his decision, under such rules of procedure as may be prescribed by the Conmiissioner with the approval of the Sec- retary. Income Tax 45 PART III.— CORPORATIONS. Tax on Corporations. Sec. 230. (a) That, in lieu of the taxes im- Corporation income posed by section 10 of the Revenue Act of 1916, as »« amended by the Revenue Act of 1917, and by sec- tion 4 of the Revenue Act of 1917, there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates : (1) For the calendar year 1918, 12 per centum I9i8raie of the amount of the net income in excess of the credits provided in section 236 ; and (2) For each calendar year thereafter, 10 per Rate for succeeding centum of such excess amount. y®"* (b) For the purposes of the Act approved March Carriers under 21, 1918,*entitled "An Act to provide for the opera- ''«^«'«* «•"•'«' tion of transportation systems while under Federal control, for the just compensation of their owners and for other purposes," five-sixths of the tax im- posed by paragraph (1) of subdivision (a) and four-fifths of the tax imposed by paragraph (2) of subdivision (a) shall be treated as levied by an Act in amendment of Title I of the Revenue Act of 1917. •Section 1 of the Act approved March 21, 1918, contains the fol- lowing provision respecting the division of taxes between the Gov- ernment and the railways: Every such agreement [between Government and carrier] shall provide that any Federal taxes under the Act of October third, nine- teen hundred and seventeen, or Acts in addition thereto or in amend- ment thereof, conunonly called war taxes, assessed for the period of Federal control beginning January first, nineteen hundred and eighteen, or any part of such period, shall be paid by the carrier out of his own funds, or shall be charged against or deducted from the just compensation; that other taxes assessed under Federal or any other governmental authority for the period of Federal control or any part thereof ♦ ♦ * shall be paid out of revenues derived from railway operations while under Federal control • " " • • 44 RsTBKUK Act Exempt corporation!: Labor organizationt Mutual tanngs banks Fraternal societies Building and loan associations Cemetery companiet Educational or charitable corpora- tions Chambers off commerce Cvic leagues Recreation clubs Conditional and Other Exemptions. Sec. 231. That the following organizations shall be exempt from taxation under this title — (1) Labor, agricultural, or horticultural organ- izations ; (2) Mutual savings banks not having a capital stock represented by shares ; (3) Fraternal beneficiary societies, orders, or as- sociations, (a) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and (b) providing for the payment of life, sick, ac- cident or other benefits to the members of such so- ciety, order, or association or their dependents; (4) Domestic building and loan associations and cooperative banks without capital stock organized and operated for mutual purposes and without profit; (5) Cemetery companies owned and operated ex- clusively for the benefit of their members; (6) Corporations organized and operated exclu- sively for religious, charitable, scientific, or educa- tional purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stock- holder or individual ; (7) Business leagues, chambers of commerce, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private stockholder or individual ; (8) Civic leagues or organizations not organized for profit but operated exclusively for the promo- tion of social welfare; (9) Clubs organized and operated exclusively for pleasure, recreation and other nonprofitable purposes, no part of the net earnings of which in- Ikcome Tax 46 ures to the benefit of any private stockholder or member ; (10) Farmers' or other mutual hail, cyclone or Lo"*«"|"a* fire insurance companies, mutual ditch or irrigation ®'«^™"'*®"' companies, mutual or cooperative telephone com- panies or like organizations of a purely local char- acter, the income of which consists solely of assess- ments, dues, and fees collected from members for the sole purpose of meeting expenses ; ( 11 ) Farmers', fruit growers', or like associations. Cooperative selling organized and operated as sales agents for the pur- *s®""®* pose of marketing the products of members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quan- tity of produce furnished by them; (12) Corporations organized for the exclusive Holding purpose of holding title to property, collecting in- c»T>»^at»»n« ^^ come therefrom, and turning over the entire amount "*T . ,, « , . ° ... 1 • 1 •. organizations thereoi, less expenses, to an organization which it- self is exempt from the tax imposed by this title ; (13) Federal land banks and national farm-loan Federaiiand banks associations as provided in section 26 of the Act «"<>n«tio»«>/™- n-ri ' 1 ^ cc A A »®*" associations approved July 17, 1916, entitled An Act to pro- vide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other pur- poses ;" /-.\ -r» 1 • •• Personal service (14) Personal service corporations. corporations Net Income Defined. Sec. 232. That in the case of a corporation sub- ject to the tax imposed by section 230 the term "net income" means the gross income as defined in sec- g^j, ^f tion 233 less the deductions allowed by section 234, computation 4« Re vs K UE Act See paf e 20 Life insurance companies Mutual marine insurance companies Foreign corporations, gross income of Business expenses and the net income shall be computed on the same basis as is provided in subdivision (b) of section 212 or in section 226. Gross Income DefinecL Sec. 233. (m) That in the case of a corporation subject to the tax imposed by section 230 the term "gross income" means the gi'oss income as defined in section 213, except that: (1) In the case of life insurance companies there shall not be included in gross income such portion of any actual premium received from any individ- ual policyholder as is paid back or credited to or treated as an abatement of premiimi of such policy- holder vi^ithin the taxable year. (2) Mutual marine insurance companies shall include in gross income the gross premiums col- lected and received by them less amounts paid for reinsurance. (b) In the case of a foreign corporation gross income includes only the gross income from sources within the United States, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, dividends from resident corporations, and including all amounts re- ceived (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. Deductions Allowed. Sec. 234. (a) That in computing the net income of a corporation subject to the tax imposed by sec- tion 230 there shall be allowed as deductions: (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carry- ing on any trade or business, including a reasonable IxcomeTax 47 allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made, as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity ; (2) All interest paid or accrued within the tax- interest able year on its indebtedness, except on indebted- ness incurred or continued to purchase or carry ob- ligations or securities (other than obligations of the United States issued after September 24, 1917) the interest upon which is wholly exempt from taxation under this title as income to the taxpayer, or, in the case of a foreign corporation, the proportion of such interest which the amount of its gross income from sources within the United States bears to the amount of its gross income from all sources within and without the United States ; (3) Taxes paid or accrued within the taxable Taxes paid or accrued year imposed (a) by the authority of the United within taxable year States, except income, war-profits and excess- profits taxes; or (b) by the authority of any of its possessions, except the amount of income, war- profits and excess-profits taxes allowed as a credit under section 238; or (c) by the authority of any State or Territory, or any county, school district, municipality, or other taxing subdivision of any State or Territory, not including those assessed against local benefits of a kind tending to increase the value of the property assessed; or (d) in the case of a domestic corporation, by the authority of any foreign country, except the amount of income, war-profits and excess-profits taxes allowed as a credit under section 238 ; or (e) in the case of a for- eign corporation, by the authority of any foreign country (except income, war-profits and excess- profits taxes, and taxes assessed against local bene- 48 RsvB K us Act Debtor corporation* not permitted to deduct tax assumed under "tax-free coTonant" clauses Losses Debts Dividends from taxable corporations Depreciation and obsolescence Amortization of plant and equipment used for war work Review of amortiza- tion deduction by (Commissioner fits of a kind tending to increase the value of the property assessed), upon the property or business; Provided, That in the case of obligors specified in subdivision (b) of section 221 no deduction for the payment of the tax imposed by this title or any other tax paid pursuant to the contract or provision referred to in that subdivision, shall be allowed ; (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise; (5) Debts ascertained to be worthless and charged off within the taxable year; (6) Amounts received as dividends from a cor- poration which is taxable under this title upon its net income, and amounts received as dividends from a personal service corporation out of earnings or profits upon which income tax has been imposed by Act of Congress; • (7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or busi- ness, including a reasonable allowance for obsoles- cence ; (8) In the case of buildings, machinery, equip- ment, or other faciUties, constructed, erected, in- stalled, or acquired, on or after April 6, 1917, for the production of articles contributing to the prose- cution of the present war, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amortization of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again in- cluding any amount otherwise allowed under this title or previous acts of Congress as a deduction in computing net income. At any time within three years after the termination of the present war, the Conunissioner may, and at the request of the tax- Isr COMK Tax 49 payer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evi- dence that the deduction originally allowed was in- correct, the taxes imposed by this title and by Title III for the year or years affected shall be redeter- mined; and the amount of tax due upon such re- determination, if any, shall be paid upon notice and demand by the collector, or the amount of tax over- paid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of sec- tion 252 ; (9) In the case of mines, oil and ffas wells, other ^ , . , ,11 .. 1 ,' ^ iin Depletion of natural natural deposits, and tmiber, a reasonable allowance resources for depletion and for depreciation of improvements, according to the peculiar conditions in each case, based upon cost including cost of development not otherwise deducted; Provided, That in the case of such properties acquired prior to March 1, 1913, the fair market value of the property (or the taxpay- er's interest therein) on that date shall be taken in lieu of cost up to that date ; Provided further. That in the case of mines, oil and gas wells, discovered by the taxpayer, on or after March 1, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the prop- erty is materially disproportionate to the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the dis- covery, or within thirty days thereafter ; such reas- onable allowance in all the above cases to be made under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee; (10) In the case of insurance companies, in ad- ,„,„^,e companies dition to the above: (a) the net addition required 50 Ubvemui Act Weekly prenuum payment insurance companiea Mutual marine insurance companies Other mutual insurance companies Qaim in abatement for: by law to be made within the taxable year to re- serve funds (including in the case of assessment in- surance companies the actual deposit of sums with State or Territorial officers pursuant to law as ad- ditions to guarantee or reserve funds) ; and (b) the sums other ihan dividends paid within the taxable year on policy and annuity contracts ; (11) In the case of corporations issuing policies covering life, health, and accident insurance com- bined in one policy issued on the weekly premium payment plan continuing for life and not subject to cancellation, in addition to the above, such por- tion of the net addition (not required by law) made within the taxable year to reserve funds as the Com- missioner finds to be required for the protection of the holders of such policies only; ( 12 ) In the case of mutual marine insurance com- panies, there shall be allowed, in addition to the de- ductions allowed in paragraphs (1) to (10), in- clusive, amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment and the payment thereof; (13) In the case of mutual insurance companies (other than mutual life or mutual marine insurance companies) requiring their members to make pre- mium deposits to provide for losses and expenses, there shall be allowed, in addition to the deductions allowed in paragraphs (1) to (10), inclusive, (un- less otherwise allowed under such paragraphs) the amount of premiimi deposits returned to their policyholders and the amount of premiimi deposits retained for the payment of losses, expenses, and reinsurance reserves; (14) (a) At the time of filing return for the tax- able year 1918 a taxpayer may file a claim in abate- ment based on the fact that he has sustained a sub- IncomeTax 61 stall tial loss (whether or not actually reahzed by Loss from shrinkage sale or other disposition) resulting from any ma- of inventory values terial reduction (not due to temporary fluctuation) of the value of the inventory for such taxable year, or from the actual payment after the close of such taxable year of rebates in pursuance of contracts en- Payment of rebates tered into during such year upon sales made during such year. In such case payment of the amount of ^the tax covered by such claim shall not be required until the claim is decided, but the taxpayer shall ac- company his claim with a bond in double the amount Bond for payment of the tax covered by the claim, with sureties satis- ®^ *^* factory to the Commissioner, conditioned for the payment of any part of such tax found to be due, with interest. If any part of such claim is disal- lowed then the remainder of the tax due shall on notice and demand by the collector be paid by the taxpayer with interest at the rate of 1 per centum per month from the time the tax would have been due had no such claim been filed. If it is shown to Deduction of loss the satisfaction of the Commissioner that such sub- stantial loss has been sustained, then in computing the taxes imposed by this title and by Title III the amount of such loss shall be deducted from the net income, (b) If no such claim is filed, but it is ^j'^^'J""^^^^^^^^ shown to the satisfaction of the Commissioner that claim has been filed during the taxable year 1919 the taxpayer has sus- tained a substantial loss of the character above de- scribed then the amount of such loss shall be de- ducted from the net income for the taxable year 1918 and the taxes imposed by this title and by Title III for such year shall be redetermined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermination shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. 62 RevEKDfe Act Deductions allowed (b) 111 tlic cEsc of a foreign corporatioii the dc- forcif n corporauolu (h,ctions allowcd in subdivision (a), except those allowed in paragraph (2) and in clauses (a), (b), and (c) of paragraph (3), shall be allowed only if and to the extent that they are connected with in- come arising from a source within the United States; and the proper apportionment and alloca- tion of the deductions with respect to sources of in- come within and without the United States shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary. Items Not Deductible. Non-dcduciibie items, gEC. 235. That in computing net income no dc- *** ^**^ duction shall in any case be allowed in respect of any of the items specified in section 215. Dcdiu Interest on obliga- tions of U. S. and the War Finance Corporation War-profits and excess- profits tax assessed for same taxable year Credits Allowed. Sec. 286. That for the purpose only of the tax imposed by section 230 there shall be allowed the following credits: (a) The amount received as interest upon obliga- tions of the United States and bonds issued by the War Finance Corporation, which is included in gross income under section 233; (b) The amount of any taxes imposed by Title III for the same taxable year; Provided, That in the case of a corporation which makes return for a fiscal year beginning in 1917 and ending in 1918, in computing the tax as provided in subdivision (a) of section 205, the tax computed for the entire period under Title II of the Revenue Act of 1917 shall be credited against the net income computed for the entire period under Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 and under Title I of the Revenue Act of 1917, and the IncomeTax 63 tax computed for the entire period under Title III of this Act at the rates prescribed for the calendar year 1918 shall be credited against the net income computed for the entire period under this title ; and (c) In the case of a domestic corporation, $2,000. Specific credit of $2,000 Payment of Tax at Source. Sec. 237. That in the case of foreign corpora- ^. , , ... tions subject to taxation under this title not eng^^ged source, see page 36 in trade or business within the United States and not having any office or place of business therein, there shall be deducted and withheld at the source in the same manner and upon the same items of in- come as is provided in section 221 a tax equal to 10 Rate of withholding per centum thereof, and such tax shaU be returned lo per cent and paid in the same manner and subject to the same conditions as provided in that section; Pro- withholding on lax- vided. That in the case of interest described in sub- free covenant bond division (b) of that section the deduction and with- interest, 2 per cent holding shall be at the rate of 2 per centum. Credit for Taxes. Sec. 238. (a) That in the case of a domestic cor- credit for taxes paid poration the total taxes imposed for the taxable foreign countries or year by this title and b}^ Title III shall be credited possessions of the with the amount of any income, war-profits and ex- ^' ^' cess-profits taxes paid during the taxable year to any foreign country, upon, income derived from sources therein, or to any possession of the United oxares. . If accrued taxes when paid differ from the Redetermination of amounts claimed as credits bv the corporation, or tax if credit differs .„ . .,. n T 1 • '' 1 t • iii from amount actually if any tax paid is refunded m whole or m part, the ^^jj corporation shall at once notify the Commissioner who shall redetermine the amount of the taxes due under this title and under Title III for the year or vears affected, and the amount of taxes due upon 54 Rkvexus Act such redetermination, if any, shall l)e paid hy the corporation upon notice and demand by the col- lector, or the amoimt of taxes overpaid, if any, shall be credited or refunded to the corporation in ac- cordance wi^h the provisions of section 2.52. In the case of such a tax accrued but not paid, the Com- missioner as a condition precedent to the allowance of this credit may require the corporation to give a Security for payment boud with surctics Satisfactory to and to be ap- proved by him in such penal sum as he may require, conditioned for the payment by the taxpayer of any amount of taxes found due upon any such redeter- mination ; and the bond herein prescribed shall con- tain such further conditions as the Commissioner may require. (b) This credit shall be allowed only if the tax- payer furnishes evidence satisfactory to the Com- missioner showing the amount of income derived from sources witliin such foreign country or such possession of the United States, as the case may be, and all other information necessary for the compu- tation of such credit. (c) If a domestic corporation makes a return for a fiscal year beginning in 1917 and ending in 1918, only that proportion of this credit shall be allowed which the part of such period within the calendar 'year 1918 bears to the entire period. ETidence required to obtain credit Credit wliere fiscal year includes parts of 1917 and 1918 Returns required from taxable corporations and personal service corporations Corporation Returns. Sec. 239. That every corporation subject to tax- ation under this title and every personal ser\'ice cor- poration shall make a return, stating specifically the items of its gross income and the deductions and credits allowed bv this title. The return shall be sworn to by the president, vice president, or other principal officer and by the treasurer or assistant treasurer. If any foreign corporation has no office IxcomeTax 55 or place of business in the United States but has Foreign corporations an agent in the United States, the return shall be with agenu in the made by the agent. In cases where receivers, trus- ^"'*^** ^*^*^* tees in bankruptcy, or assignees are operating the property or business of corporations, such receivers, trustees, or assignees shall make returns for such corporations in the same manner and form as cor- Receivers porations are required to make returns. Any tax due on the basis of such returns made by receivers, trustees, or assignees shall be collected in the same manner as if collected from the corporations of •whose business or property they have custody and control. Returns made under this section shall be subject J to the provisions of sections 226 and 228. See pages 4i and 42 When return is made under section 226 the credit provided in subdivision (c) of section 236 shall be treduced to an amount which bears the same ratio to See page 52 the full credit therein provided as the number of months in the period for which such return is made bears to twelve months. Consolidated Returns. Sec. 240. (a) That corporations which are affih- Affiliated corporations ated within the meaning of this section shall, under to make consolidated regulations to be prescribed by the Commissioner returns with the approval of the Secretary, make a consoh- / dated return of net income and invested capital for the purposes of this title and Title III, and the taxes thereunder shall be computed and determined upon the basis of such return ; Provided, That there Affiliated corporation shall be taken out of such consohdated net income which derives income and invested capital, the net income and invested /onTrfcT^*^""*^"' capital of any such affiliated corporation organized after August 1, 1914, and not successor to a then existing business, 50 per centimi or more of whose gross income consists of gains, profits, conunissions, Rb vEKui Act Assessment of tax on a^Iiated cor- porations Only one specific exemption allowed For sections 311 and 312 see pages 74 and 75 Corporations deemed to be affiliated (1) Where one controls stock of other (2) Where stock of both is owned by same interest Credit for foreign taxes allowed domestic corporation wluch controls stock of foreign corporation or other income, derived from a Govermnent con- tract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. In such case the corporation so taken out shall be separately assessed on the basis of its own invested capital and net income* and the remainder of such affiliated group shall be assessed on the basis of the remain- ing consolidated invested capital and net income. In any case in which a tax is assessed upon the basis of a consolidated return, the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective affiliated cor- porations in such proportions as may be agreed up- on among them, or, in the absence of any such agree- ment, then on the basis of the net income properly assignable to each. There shall be allowed in com- puting the income tax only one specific credit of $2,000 (as provided in section 286) ; in computing the war-profits credit (as provided in section 811) only one specific exemption of $3,000; and in com- puting the excess-profits credit (as provided in sec- tion 812) only one specific exemption of $8,000. (b) For the purpose of this section two or more domestic corporations shall be deemed to be affih- ated ( 1 ) if one corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all the stock of the otlier or others, or (2) if substantially all the stock of two or more corporations is owned or controlled by the same interests. (c) For the purposes of section 238 a domestic corporation which owns a majority of the voting stock of a foreign corporation shall be deemed to have paid the same proportion of any income, war- profits and excess-profits taxes paid (but not in- cluding taxes accrued) by such foreign corporation during the taxable year to any foreign coimtry or IxcomeTax 67 to any possession of the United States upon income derived from sources without the United States, which the amount of any dividends (not deductible under section 234) received by such domestic cor- poration from such foreign corporation during the taxable year bears to the total taxable income of such foreign corporation upon or with respect to which such taxes were paid; Provided, That in no such case shall the amount of the credit for such taxes exceed the amount of such dividends (not de- ductible under section 234) received by such domes- tic corporation during the taxable year. Time and Place for Filing Returns. Sec. 241. (a) That returns of corporations shall Returns, when be made at the same time as is provided in subdi- ^ ' *^* ^^^^ vision (a) of section 227. (b) Returns shall be made to the collector of the Where filed district in which is located the principal place of business or principal office or agency of the corpo- ration, or, if it has no principal place of business or principal office or agency in the United States, then to the collector at Baltimore, Maryland. PART IV.— ADMINISTRATIVE PROVISIONS. Pajmtient of Taxes. Sec. 250. (a) That except as otherwise provided installment tax in this section and sections 221 and 237 the tax shall payments be paid* in four installments, each consisting of one- fourth of the total amount of the tax. The first in- stallment shall be paid at the time fixed by law for t- w filing the return, and the second installment shaU be paid on the fifteenth day of the third month, the third installment on the fifteenth day of the sixth •For use of uncertified checks and U. S. certificates of indebted- ness to pay taxes, see section 1314. 88 Revbvub Act Postponement of payment Interest charge on postponed install- ments Non-payment of installments Single payment, time of making Examination of returns Credit or refund of exceM payments month, and the fourth instalhnent on the fifteenth day of the ninth month, after the time fixed by law for filing the return. Where an extension of time for filing a return is granted the time for payment of the first instalhnent shall be postponed until the date of the eviration of the period of the extension, but the time for payment of the other instalhnents shall not be postponed unless the Commissioner so provides in granting the extension. In any case in which the time for the payment of any installment is at the request of the taxpayer thus postponed, there shall be added as part of such installment in- terest thereon at the rate of one-half of 1 per centum per month from the time it would have been due if no extension had been granted, until paid. If any installment is not paid when due, the whole amount of the tax unpaid shall become due and payable upon notice and demand by the collector. The tax may at the option of the taxpayer be paid in a single payment instead of in installments, in which case the total amount shall be paid on or before the time fixed by law for filing the return, or, where an extension of time for filing the return has been granted, on or before the expiration of the period of such extension. (b) As soon as practicable after the return is filed, the Commissioner shall examine it. If it then appears that the correct amotmt of the tax is greater or less than that shown in the return, the install- ments shall be recomputed. If the amount already paid exceeds that which should have been paid on the basis of the installments as recomputed, the ex- cess so paid shall be credited against the subsequent installments; and if the amount already paid ex- ceeds the correct amount of the tax, the excess shall be credited or refunded to the taxpayer in accord- ance with the provisions of section 252. IncomeTax 69 If the amount already paid is less than that which Understatements should have been paid, the difference shall, to the extent not covered by any credits then due to the taxpayer under section 252, be paid upon notice and No penalty for under- demand by the collector. In such case if the return '^^'^^j^/^h* ""^"^^ is made in good faith and the understatement of the amount in the return is not due to any fault of the taxpayer, there shall be no penalty because of such understatement. If the understatement is due to negligence on the part of the taxpayer, but withoiit intent to defraud, there shall be added as part of the tax 5 per centum of the total amount of the deficiency, plus interest at the rate of 1 per centum per month on the amount of the deficiency of each installment from the time the installment was due. If the understatement is false or fraudulent with Fraudulent under- intent to evade the tax, then, in lieu of the penalty provided by section 3176 of the Revised Statutes, as amended, for false or fraudulent returns willfully made, but in addition to other penalties provided by law for false or fraudulent returns, there shall be added as part of the tax 50 per centum of the amount of the deficiency. (c) If the return is made pursuant to section See section 1317 3176 of the Revised Statutes as amended, the '>f«»^»A^* amount of tax determined to be due under such re- turn shall be paid upon notice and demand by the collector. (d) Except in the case of false or fraudulent re- 5-year limit on power turns with intent to evade the tax, the amount of «^ Commissioner to •1-1 review return tax due under any return shall be determmed and assessed by the Commissioner within five years after the return was due or w^as made, and jio suit or pro- ceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made. In the case of such false or fraudulent returns, the amount of 60 R r VK Kui A CT Penalty for failure to pay tax when due No penally when claim for abatement it made Notice of date tax if due Evasion of tax tax due may be determined at any time after the return is filed, and the tax may be collected at any time after it becomes due. (e) If any tax remains unpaid after the date when it is due, and for ten days after notice and demand by*the collector, then, except in the case of estates of insane, deceased, or insolvent persons, there shall be added as part of the tax the sum of 5 per centum on the amount due but unpaid, plus in- terest at the rate of 1 per centum per month upon such amount from the time it became due; Pro- vided, That as to any such amount which is the sub- ject of a bona fide claim for abatement such sum of 5 per centum shall not be added and the in- terest from the time the amount was due until the claim is decided shall be at the rate of one-half of 1 per centum per month. In the case of the first installment provided for in subdivision (a) the instructions printed on the return shall be deemed sufficient notice of the date when the tax is due and sufficient demand, and the taxpayer's computation of the tax on the return shall be deemed sufficient notice of the amount due. (f ) In any case in which in order to enforce pay- ment of a tax it is necessary for a collector to cause a warrant of distraint to be ser\'ed, there shall also be added as part of the tax the sum of $5. (g) If the Commissioner finds that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such proceedings be brought without delav, the Commissioner shall declare the taxable period for such taxpayer terminated at the I N C O M E T A X 6^1 end of the calendar month then last past and shall cause notice of such finding and declaration to be given the taxpayer, together with a demand for im- Demand for mediate payment of the tax for the taxable period immediate payment so declared terminated and of the tax for the pre- ceding taxable year or so much of said tax as is un- paid, whether or not the time otherwise allowed by law for filing return and paying the tax has ex- pired; and such taxes shall thereupon become im- mediately due and payable. In any action or suit Evidence of intent to brought to enforce pajrment of taxes made due and ®^^*^® '^^ payable by virtue of the provisions of this subdivi- sion the finding of the Commissioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evi- dence of the taxpayer's design. A taxpayer who is not in default in making any return or paying in- come, war-profits, or excess-profits tax under any Act of Congress may furnish to the United States, under regulations to be prescribed by the Commis- sioner with the approval of the Secretary, security Security for payment approved by the Commissioner that he will duly make the return next thereafter required to be filed and pay the tax next thereafter required to be paid. The Commissioner may approve and accept in like manner security for return and payment of taxes made due and payable by virtue of the provisions of this subdivision, provided the taxpayer has paid in full all other income, war-profits, or excess- profits taxes due from him under any Act of Con- gress. If security is approved and accepted pur- suant to the provisions of this subdivision and sucli further or other security with respect to the tax or taxes covered thereby is given as the Commissioner shall from time to time find necessary and require, payment of such taxes shall not be enforced by any proceedings under the provisions of this subdivision 62 R K V E N u B Act Receipts to be given on request Overpayments credited against taxes due prior to the expiration of the time otherwise allowed for paying such respective taxes. Receipts for Taxes. Sec. 251. That every collector to whom any pay- ment of any tax is made under the provisions of this title shall upon request give to the person making such payment a full written or printed receipt, stat- ing the amount paid and the particular account for which such payment was made; and whenever any debtor pays taxes on account of pajTnents made or to be made by him to separate creditors the collector shall, if requested by such debtor, give a separate receipt for the tax paid on account of each creditor in such form that the debtor can conveniently pro- duce such receipts separately to his several creditors in satisfaction of their respective demands up to the amounts stated in the receipts; and such receipt shall be sufficient evidence in favor of such debtor to justify him in withholding from his next payment to his creditor the amount therein stated; but the creditor may, upon giving to his debtor a full vrrii- ten receipt acknowledging the payment to him of any sum actually paid and accepting the amount of tax paid as aforesaid (specifying the same) as a fur- ther satisfaction of the debt to that amount, require the surrender to him of such collector's receipt. Refunds. Sec. 252. That if, upon examination of any re- turn of income made pursuant to this Act, the Act of August 5, 1909, entitled "An Act to provide revenue, equalize duties, and encourage the indus- tries of the United States, and for other purposes," the Act of October 3, 1913, entitled "An Act to re- duce tariff duties and to provide revenue for the 1 K C O M 15 T A X 63 Government, and for other purposes," the Revenue Act of 1916, as amended, or the Revenue Act of 1917, it appears that an amount of income, war- profits or excess-profits tax has been paid in excess of that properly due, then, notwithstanding the pro- visions of section 3228 of the Revised Statutes, the amount of the excess shall be credited against any income, war-profits or excess-profits taxes, or in- Balance refunded stallment thereof, then due from the taxpayer un- der any other return, and any balance of such ex- cess shall be immediately refunded to the taxpayer ; . Provided, That no such credit or refund shall be ^" '"^""'** ^^*" 5 years from date allowed or made after five years from the date when ©f return the return was due, unless before the expiration of such five years a claim therefor is filed by the tax- payer. Penalties. Sec. 253. That any individual, corporation, or Failure to make return, pay tax, ( furnish information partnership required under this title to pay or col- ^*^*""' ^*^ ***' '^^ lect any tax, to make a return or to supply informa- tion, who fails to pay or collect such tax, to make such return, or to supply such information at the time or times required under this title, shall be liable to a penalty of not more than $1,000. Any individ- ual, corporation, or partnership, or any officer or employee of any corporation or member or em- ployee of a partnership, who willfully refuses to Wdiful attempt to ^ *^ 111 1 1. . defeat or evade th pay or collect such tax, to make such return, or to ^^ supply such information at the time or times re- quired under this title, or who willfully attempts in any manner to defeat or evade the tax imposed by this title, shall be guilty of a misdemeanor and shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution. 64 Rkvekub Act Corporations |o report dividends paid, when required Brokers to report customers' profits and losses, when required Payments of income of $1,000 or over to be reported by payor Returns of Payments of Dividends. Sec. 254. That every corporation subject to the tax imposed by this title and every personal service corporation sliall, when required by the Commis- sioner, render a correct return duly verified under oath, of its payments of dividends, stating the name and address of each stockliolder, the number of shares owned by him, and the amount of dividends paid to him. Returns of Brokers. Sec. 255. That every individual, corporation, or partnership doing business as a broker shall, when required by the Commissioner, render a correct re- turn duly verified under oath, under such rules and regulations as the Conunissioner, with the approval of the Secretary, may prescribe, showing the names of customers for whom such individual, corporation, or partnership has transacted any business, \vith such details as to the profits, losses, or other infor- mation which the Conmiissioner may require, as to each of such customers, as will enable the Commis- sioner to determine whether all income tax due on profits or gains of such customers has been paid. Information at Source. Sec. 256. That all individuals, corporations, and partnerships, in whatever capacity acting, including lessees or mortgagors of real or personal propertj', fiduciaries, and employers, making payment to an- other individual, corporation, or partnership, of in- terest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed, or determinable gains, profits, and income (other than payments described in sections 254- and 255), of $1,000 or more in any taxable year, or, in the case of such payments made by the United IzrcoMx Tax 89 States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Commissioner, un- der such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment. Such returns may be required, regardless of Returns of bond amounts, (1) in the case of payments of interest interest payments upon bonds, mortgages, deeds of trust, or other similar obligations of corporations, and (2) in the Returns of interest case of collections of items (not payable in the and dividends of United States) of interest upon the bonds of for- ^^^"'^^^^^"" "^ eign countries and interest upon the bonds of and dividends from foreign corporations by individuals, (corporations, or part^erships, undertaking as a mat- ter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange. When necessary to make effective the provisions of this section the name and address of the recipient of income shall be furnished upon demand of the individual, corporation, or partnership paying the income. The provisions of this section shall apply to the No return required calendar year 1918 and each calendar year there- jf '"*®';f ** **? n ^t-n . 1..1 L<»*. U. S. obligations after, but shall not apply to the payment oi mter- est on obligations of the United States. I Returns to be Public Records. I Sec. 257. That returns upon which the tax has inspection of returns ■ been determined by the Commissioner shall consti- 1 tute public records ; but they shall be open to inspec- ] tion only upon order of the President and under 1 66 Rbvekub Act State authorities to have access to corporation returns Stockholders may examine return of corporation Penalty for divulging information Publication of names of persons making returns rules and regulations prescribed by the Secretary and approved by the President ; Provided, That the proper officers of any State imposing an income tax may, upon the request of the governor thereof, have access to the returns of any corporation, or to an abstract thereof showing the name and income of the corporation, at such times and in such manner as the Secretary may prescribe; Provided further, That all bona fide stockholders of record owning 1 per centum or more of the outstanding stock of any corporation shall, upon making request of the Com- missioner, be allowed to examine the annual income returns of such corporation and of its subsidiaries. Any stockholder who pursuant to the provisions of this section is allowed to examine thcTetum of anv corporation, and who makes known in any manner whatever not provided by law the amount or source of income, profits, losses, expenditures, or any par- ^ ticular thereof, set forth or disclosed in any such return, shall be guilty of a misdemeanor and be punished by a fine not exceeding $1,000, or by im- prisonment not exceeding one year, or both. The Commissioner shall as soon as practicable in each year cause to be prepared and made available to public inspection in such manner as he may de- j termine, in the office of the collector in each internal- revenue district and in such other places as he may determine, lists containing the names and the post- office addresses of all individuals making income- tax returns in such district. Publication of statistics Publication of Statistics. Sec. 258. That the Commissioner, with the ap- proval of the Secretary, shall prepare and publish annually statistics reasonably available with respect to the operation of the income, war-profits and ex- cess-profits tax laws, including classifications of tax- I N COME Tax ' g7 payers and of income, the amounts allowed as de- ductions, exemptions, and credits, and any other facts deemed pertinent and valuable. Collection of Foreign Items. Sec. 259. That all individuals, corporations, or Ucense required for partnerships undertaking as a matter of business or coMecUon of foreign for profit the collection of foreign payments of in- *'*"' terest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner and shall be subject to such regula- tions enabling the Government to obtain the in- formation required under this title as the Commis- sioner, with the approval of the Secretary, shall Penalty for collecUon prescribe; and whoever knowingly undertakes to by unlicensed agency collect such payments without having obtained a license therefor, or without complying with such regulations, shall be guilty of a misdemeanor and shall be fined not more than $5,000, or imprisoned for not more than one year, or both. Citizens of United States Possessions. Sec. 260. That any individual who is a citizen of citizens of possessions any possession of the United States (but not other- of u. s. taxed only wise a citizen of the United States) and who is not »" ^'l^o"*^ ^^o™ t*'^ a resident of the United States, shall be subject to taxation under this title only as to income derived from sources within the United States, and in such case the tax shall be computed and paid in the same manner and subject to the same conditions as in the case of other persons who are taxable only as to income derived from such sources. Porto Rico and Philippine Islands. Sec. 261. That in Porto Rico and the Philippine income tax in Porto Islands the income tax shall be levied, assessed, col- R»c» «»«* Philippine lected, and paid in accordance with the provisions * *" * of the Revenue Act of 1916 as amended. 68 Revbkui Act Returns bj: IndiTiduali Corporations Nonresident aliens Foreign corporations See pages 29, 48 Returns shall be made and taxes shall be paid un- der Title I of such Act in Porto Rico or the Philip- pine Islands, as -the case may be, by (1) every in- dividual who is a citizen or resident of Porto Rico or the Philippine Islands or derives income from sources thecein, and (2) every corporation created or organized in Porto Rico or the Philippine Islands or deriving income from sources therein. An indi- vidual who is neither a citizen nor a resident of Porto Rico or the Philippine Islands but derives income from sources therein, shall be taxed in Porto Rico or the Philippine Islands as a nonresident ahen individual, and a corporation created or organized outside Porto Rico or the Philippine Islands and deriving income from sources therein shall be taxed in Porto Rico or the Philippine Islands as a foreign corporation. For the purposes of section 216 and of paragraph (6) of subdivision (a) of section 284 a tax imposed in Porto Rico or the Philippine Islands upon the net income of a corporation shall not be deemed to be a tax under this title. The Porto Rican or Philippine Legislature shall have power by due enactment to amend, alter, modify, or repeal the income tax laws in force in Porto Rico or the Philippine Islands, respectively. I a Definitions See pages 8, 9 TITLE HI. War-Profits and Excess-Profits Tax PART I.— GENERAL DEFINITIONS. Sec. 300. That when used in this title the terms taxable year," "fiscal year," "personal service cor- poration," "paid or accrued," and "dividends" shall have the same meaning as provided for the purposes of income tax in sections 200 and 201. The first taxable year for the purposes of this title shall be the same as the first taxable year for the purposes of the income tax under Title II. PART II.— IMPOSITION OF TAX. Tax Rates for 1918 Sec. 301. (a) That in lieu of the tax imposed by Tax applies only to Title II of the Revenue Act of 1917, but in addition corporations to the other taxes imposed by this Act, there shall be levied, collected, and paid for the taxable year 1918 upon the net income of every corporation* a tax equal to the sum of the following: FIRST BRACKET 30 per centimi of the amount of the net income in p^^^j bracket, excess of the excess-profits credit ( determined under so per cent section 312) and not in excess of 20 per centum of the invested capital; •For corporations which are exempt (including personal service corporations), see pages 44-45. 69 I 70 R B VE jr u« A CT Second bracket, 65 per cent Third bracket, 80 per cent SECOND BRACKET Q5 per centuni of the amount of the net income in excess of 20 per centum of the invested capital; THIRD BRACKET The sum, if any, by which 80 per centum of the i amount of the net income in excess of the war- ' profits credit (determined under section 311) ex- ceeds the amount of the tax computed under the first and second brackets. I Tax Rates for Subsequent Years. Tax rales for 1919 (b) For the taxablc year 1919 and each taxable and subsequent years year thereafter thcrc shall be levied, collected, and paid upon the net income of every corporation (ex- cept corporations taxable under subdivision (c) of this section) a tax equal to the sum of the follow- ing: FIRST BRACKET 20 per centum of the amount of tlie net income in excess of the excess-profits credit (determined un- der section 312) and not in excess of 20 per centum of the invested capital; First bracket, 20 per cent Second bracket, 40 per cent 8B00ND BRACKET 40 per centum of the amount of the net income in excess of 20 per centum of the invested capital. Tm on income from (c) For the taxable year 1919 and each taxable fovernmeni contracts yg^r thereafter thcrc shall be levied, collected, and paid upon the net income of every corporation which derives in such year a net income of more than $10,000 from any government contract or con- tracts made between April 6, 1917, and Xoveml) 11, 1918, both dates inclusive, a tax equal to the sum of the following: (1 ) Such a portion of a tax computed at the rates specified in subdivision (a) as the part of the net Application of 1918 rales W A R-P ROFITS AND ExCES S-P ROPITsTaX 71 income attributable to such government contract or contracts bears to the entire net income. In com- puting such tax the excess-profits credit and the war-profits credit apphcable to the taxable year shall be used ; (2) Such a portion of a tax computed at the rates specified in subdivision (b) as the part of the net income not attributable to such government con- tract or contracts bears to the entire net income. For the purpose of determining the part of the net income attributable to such government contract or contracts, the proper apportionment and alloca- tion of the deductions with respect to gross income derived from such government contract or con- tracts and ftom other sources, respectively, shall be determined under rules and regulations prescribed by the Conmiissioner with the approval of the Secretary. Application of Excess-Profits Credit. (d) In any case where the full amount of the excess-profits credit is not allowed under the first Deduction from bracket of subdivision (a) or (b), by reason of the second bracket fact that such credit is in excess of 20 per centum of the invested capital, the part not so allowed shall be deducted from the amount in the second bracket. Carriers under Government Control. (e) For the purposes of the Act approved March Tax to be paid by 21, 1918, entitled "An Act to provide for the oper- ;^;;j:';^^^^^ ation of transportation systems while under Fed- eral control, for the just compensation of their own- ers and for other purposes," the tax imposed by this title shall be treated as levied by an Act in amend- j ment of Title II of the Revenue Act of 1917.* *Se€ footnote, page 48. 7S Re VE wz Act Maximum ratio of tax to income Where part of income ia from bucineas re- quiring inveated capital and part from "personal terTice" Tax on income from invested capital Tax on income from "personal serrice" Limitations and Exemptions. Sec. 802. That the tax imposed by subdivision (a) of section 301 shall in no case be more than 30 per centum of the amount of the net income in excess of $3,000 and not in excess of $20,000, plus 80 per centum of the amount of the net income in excess of $20,000; the tax imposed by subdivision (b) ol section 301 shall in no case be more than 20 per centum of the amount of the net income in excess of $3,000 and not in excess of $20,000, plus 40 per centimi of the amount of the net income in excess of $20,000 ; and the above limitations shall apply to the taxes computed under subdivisions (a) and (b) of section 801, respectively, when used in subdivision (c) of that section. Nothing in this section shall be construed in such manner as to increase the tax im- posed by section 801. Sec. 303. That if part of the net income of a cor- poration is derived (1) from a trade or business (or a branch of a trade or business) in which the em- ployment of capital is necessary, and (2) a part (constituting not less than 30 per centum of its total net income) is derived from a separate trade or busi- ness (or a distinctly separate branch of the trade or business) which if constituting the sole trade oi business would bring it within the class of "personal service corporations," then (under regulations pre- scribed by the Conmfiissioner with the approval of the Secretary) the tax upon the first part of such net income shall be separately computed (allowing in such computation only the same proportionate part of the credits authorized in sections 311 and 312) , and the tax upon the second part sliall be the same percentage thereof as the tax so computed upon the first part is of such first part; Provided, That the tax upon such second part shall in no case be less than 20 per centum thereof, unless the tax W A R-P aoFiTS AND ExcES s-P ropitsTax 73 upon the entire net income, if computed without benefit of this section, would constitute less than 20 per centimi of such entire net income, in which event the tax shall be determined upon the entire net income, without reference to this section, as other taxes are determined under this title. The total tax computed under this section shall be sub- ject to the limitations provided in section 302. Sec. 304. (a) That the corporations enumerated Corporations exempt in section 231 shall, to the extent that they are ex- «««P«g« 44-45 empt from income tax under Title II, be exempt from taxation under this title. (b)Any corporation whose net income for the taxable year is less than $3,000 shall be exempt from taxation under this title. (d) [c?] In the case of any corporation engaged income from gold in the mining of gold, the portion of the net income """*"*^ derived from the mining of gold shall be exempt from the tax imposed by this title, and the tax on the remaining portion of the net income shall be the proportion of a tax computed without the benefit of this subdivision which such remaining portion of the net income bears to the entire net income. Sec. 305. That if a tax is computed under this Exemption when tax title for a period of less than twelve months, the ^2*^1^ Jj^s*" ' ^" specific exemption of $3,000, wherever referred to in this title, shall be reduced to an amount which is the same proportion of $3,000 as the number of months in the period is of twelve months. PART III.— CREDITS. Sec. 310. That as used in this title the term Prewar period "prewar period" means the calendar years 1911, defined 1912, and 1913, or, if a corporation was not in ex- istence during the whole of such period, then as many of such years during the whole of which the corporation was in existence. ^* RbvbitueAct War.profiu credit Sec. 311. (a) That the war-profits credit shall consist of the sum of: (1) $3,000 (1) A specific exemption of $3,000; and (2) Average prewar (2) An amoiHit cqual to the avcFage net income income as a jusie ^£ ^j^^ corpopation foF the prcwar period, phis or minus, as the case may be, 10 per centum of the dif- ference between the average invested capital for the prewar period and the invested capital for the tax- able year. If the tax is computed for a period of less than twelve months such amount shall be reduced to the same proportion thereof as the number of months in the period is of twelve months. (b) If the corporation had no net income for the prewar period, or if the amount computed under paragraph (2) of subdivision (a) is less than 10 per centum of its invested capital for the taxable year, then the war-profits credit sliall be the sum of: ( 1 ) A specific exemption of $8,000 ; and (2) An amount equal to 10 per centum of Uie invested capital for the taxable year. (c) If the corporation was not in existence dur- ing the whole of at least one calendar year during the prewar period, then, except as provided in sub- division (d), the war-profits credit shall be the sum of: ( 1 ) A specific exemption of $3,000 ; and (2) An amount equal to the same percentage of the invested capital of the taxpayer for the taxable year as the average percentage of net income to invested capital, for the prewar period, of corpora- tions engaged in a trade or business of the same general class as that conducted by the taxpayer; but such amount shall in no case be less than 10 per centum of the invested capital of the taxpayer for J W A R-P R0FIT8 AND ExCES S-P EOFITSTaX 75 the taxable year. Such average percentage shall be Deierminaiion of determined by the Commissioner on the basis of 7"^! ?««•""»»«« , . , . T of earnings data contamed m returns made under Title II of the Revenue Act of 1917, and the average known as the median shall be used. If such average per- centage has not been determined and published at least 30 days prior to the time when the return of the taxpayer is due, then for purposes of such re- turn 10 per centum shall be used in lieu thereof; but such average percentage when determined shall be used for the purposes of section 250 in determining the correct amount of the tax. See page 57 (d) The war-profits credit shall be determined in AppHcaUonof the manner provided in subdivision (b) instead of ™niniuni credit in the manner provided in subdivision (c), in the case of any corporation which was not in existence during the whole of at least one calendar year dur- ing the prewar period, if (1) a majority of its stock at any time during the taxable year is owned or con- trolled, directly or indirectly, by a corporation which was in existence during the whole of at least one calendar year during the prewar period, or if (2) 50 per centum or more of its gross income (as com- puted under section 233 for income tax purposes) Seepage 46 consists of gains, profits, commissions, or other in- come, derived from a government contract or con- tracts made between April 6, 1917, and November 11, 1918, both dates inclusive. (e) A foreign corporation shall not be entitled Foreign to a specific exemption of $3,000. corporauons Sec. 312. That the excess-profits credit shall con- E^^ss-profits credit sist of a specific exemption of $3,000 plus an amount equal to 8 per centum of the invested capital for the taxable year. A foreign corporation shall not be entitled to the specific exemption of $3,000. 76 Rkvivub Act How to delermine net mcoro« For 1911 and 1912 For 1913 For taxable year See pages 45-46 How to determine arerage prewar net income PART IV.— NET INCOME. Sec. 320. (a) That for the purpose of this title the net income of a corporation shall be ascertained and returned — (1) For the calendar years 1911 and 1912 upon the same basis and in the same manner as provided in section 88 of the Act entitled "An Act to pro- vide revenue, equalize duties, and encourage the in- dustries of the United States, and for other pur- poses," approved August 5, 1909, except that taxes imposed by such section and paid by the corpora- tion within the year shall be included ; (2) For the calendar year 1913 upon the same basis and in the same manner as provided in Sec- tion II of the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," approved October 8, 1918, except that taxes imposed by section 38 of such Act of August 5, 1909, and paid by the corporation within the year shall be included, and except that the amounts received by it as dividends upon the stock or from the net earnings of other corporations subject to the tax imposed by Section II of such Act of October 3, 1913, shall be deducted; and (3) For the taxable year upon the same basis and in the same manner as provided for income tax pur- poses in Title II of this Act. (b) The average net income for the prewar pe- riod shall be determined by dividing the number of years within that period during the whole of which the corporation was in existence into the sum of the net income for such years, even though there may have been no net income for one or more of such years. WAB-PaOPlT8 AND £ X C E S S-P R O F I T S TaX 77 PART v.— INVESTED CAPITAL. Sec. 325. (a) That as used in this title — The term "intangible property" means patents, definitions copyrights, secret processes and formulae, good will, intang»'>^c trade-marks, trade-brands, franchises, and other like property; The term "tangible property" means stocks, tangible bonds, notes, and other evidences of indebtedness, ^^^^^ ^ bills and accounts receivable, leaseholds, and other property other than intangible property ; The term "borrowed capital" means money or fj^^ta^** other property borrowed, whether represented by bonds, notes, open accounts, or otherwise; The term "inadmissible assets" means stocks, asgeu'"' bonds, and other obligations (other than obliga- tions of the United States), the dividends or interest from which is not included in computing net income, but where the income derived from such assets consists in part of gain or profit derived from the sale or other disposition thereof, or where all or part of the interest derived from such assets is in effect included in the net income because of the hmi- tation on the deduction of interest under paragraph (2) of subdivision (a) of section 234, a correspond- ing part of the capital invested in such assets shall not be deemed to be inadmissible assets; the term "admissible assets" means all assets other than inad- A**""»»»*»^« assets niissible assets, valued in accordance with the pro- visions of subdivision (a) of section 326, section 330, and section 331. (b) For the purposes of this title, the par value Valuation of of stock or shares shall, in the case of stock or shares "^"-p*'" ''^'^^ issued at a nominal value or having no par value, be deemed to be the fair market value as of the date or dates of issue of such stock or shares. 78 Revemub Act Invested capital includeft; Cath Cath value of tangible property paid for in stock See page 65 Surplus and undivided profits Intangible property acquired before March 3, 1917 Sec. 32G. (a) That as used in this title the term "invested capital" for any year means (except as provided in subdivisions (b) and (c) of this sec- tion) : (1) Actual cash bona fide paid in for stock or shares; (2) Actual cash value of tangible property, other than cash, bona fide paid in for stock or shares, at the time of such payment, but in no case to exceed the par value of the original stock or shares specifi- cally issued therefor, unless the actual cash value of such tangible property at the time paid in is shown to the satisfaction of the Commissioner to have been clearly and substantially in excess of such par value, in which case such excess shall be treated as paid-in surplus; Provided, That the Commissioner shall keep a record of all cases in which tangible property is included in invested capital at a value in excess of the stock or shares issued therefor, containing tlic name and address of each taxpayer, the business in which engaged, the amount of invested capital and net income shown by the return, the value of the tangible property at the time paid in, the par value of the stock or shares specifically issued therefor, and the amount included under this ])aragraph as paid-in surplus. The Commissioner shall furnish a copy of such record and other detailed informa- tion with respect to such cases when required by resolution of either house of Congress, without re- gard to the restrictions contained in section 257 ; (3) Paid-in or earned surplus and undivided profits; not including surplus and undivided profits earned during the year; (4) Intangible property bona fide paid in for stock or shares prior to March 3, 1917, in an amount not exceeding (a) the actual cash value of such property at the time paid in, (b) the par value of War-Profits and Excess-Profits Tax 79 the stock or shares issued therefor, or (c) in the aggregate 25 per centum of the par value of the total stock or shares of the corporation outstanding on March 3, 1917, whichever is lowest; (5) Intangible property bona fide paid in for intangible property stock or shares on or after March 3, 1917, in an acquired after amount not exceeding (a) the actual cash value of ^"*^*'^'^^^^ such property at the time paid in, (b) the par value of the stock or shares issued therefor, or (c) in the aggregate 25 per centum of the par value of the total stock or shares of the corporation outstanding at the beginning of the taxable year, whichever is lowest; Provided, That in no case shall the total amount included under paragraphs (4) and (5) exceed in the aggregate 25 per centum of the par value of the total stock or shares of the corporation outstanding at the beginning of the taxable year; but (b) As used in this title the term "invested capi- Borrowed capital tal" does not include borrowed capital. not included (c) There shall be deducted from invested capi- Deduction for in- tal as above defined a percentage thereof equal to a*'™*"*''^ assets the percentage which the amount of inadmissible assets is of the amount of admissible and inadmis- sible assets held during the taxable year. (d) The invested capital for any period shall be Average invested the average invested capital for such period, but in "p**** the case of a corporation making a return for a fractional part of a year, it shall (except for the purpose of paragraph (2) of subdivision (a) of section 311) be the same fractional part of such average invested capital. The average invested capital for the prewar pe- Average prewar riod shall be determined by dividing the number of invested capital years within that period during the whole of which the corporation was in existence into the sum of the average invested capital for such years. Rsvcirui Act Exceptional cases See page 46 In above cases tax rate to equal average rate'on representative concerns Sec. 327. That in the following cases the tax shall be determined as provided in section 328: (a) Where the Commissioner is imable to de- termine the invested capital as provided in section 326; (b) In the case of a foreign corporation; (c) Where a mixed aggregate of tangible prop- erty and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective values of the several classes of property at the time of payment, or to distinguish the classes of prop- erty paid in for stock and for bonds, respectively; (d) Where upon application by the corporation the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal conditions af- fecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative cor- porations specified in section 328. This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high merely because the corporation earned wnthin the taxable year a high rate of profits upon a normal invested capital nor (2) in which 50 per centum or more of the gross income of the corporation for the taxable year (computed under section 233 of Title II) consists of gains, profits, commissions, or other income, derived on a cost-plus basis from a govern- ment contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. Sec. 328. (a) In the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net income of the taxpaver (in excess W A H-P aOFITS AND ExCES 8-P ROFITSTaX 81 of the specific exemption of $3,000) for the taxable year, as the average tax of representative corpora- tions engaged in a like or similar trade or business, bears to their average net income (in excess of the- specific exemption of $3,000) for such year. In the case of a foreign corporation the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representa- tive corporations. In computing the tax under this section the Com- missioner shall compare the taxpayer only with representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly cir- cumstanced with respect to gross income, net in- come, profits per unit of business transacted and capital employed, the amount and rate of war- profits or excess-profits, and all other relevant facts and circumstances. (b) For the purposes of subdivision (a) the Deierminaiion of ratios between the average tax and the average net «▼«»•»«« *« "*« income of representative corporations shall be de- termined by the Conmiissioner in accordance with regulations prescribed by him with the approval of the Secretary. In cases in which the tax is to be computed under Adjustmem of m- this section, if the tax as computed without the «taUmeni payments benefit of this section is less than 50 per centum of the net income of the taxpayer, the installments shall in the first instance be computed upon the basis of such tax; but if the tax so computed is 50 per centum or more of the net income, the installments shall in the first instance be computed upon the basis of a tax equal to 50 per centum of the net in- come. In any case, the actual ratio when ascer- tained shall be used in determining the correct amount of the tax. If the correct amount of the Rs^ExuK Act tax when determined exceeds 50 per centum of the net income, any excess of the correct installments over the amounts actually paid shall on notice and demand be paid together with interest at the rate of one-half of 1 per centum per month on such ex- cess from the time the installment was due. Record of exceptional (c) The CommissioncF shall keep a record of all "•*• cases in which the tax is determined in the manner prescribed in subdivision (a), containing the name and address of each taxpayer, the business in which engaged, the amount of invested capital and net in- come shown by the return, and the amount of in- vested capital as determined under such subdinsion. The Commissioner shall furnish a copy of such record and other detailed information with respect to such cases when required by resolution of either House of Congress, without regard to the restric- See page 65 tions Contained in section 257. Reorganizations and consolidations after January 1» 1911 Prewar income and in?«sl«d.capital Where predecessor wu a partnership or indiridual PART VI.— REORGANIZATIONS. Sec. 880. That in the case of the reorganization, consolidation, or change of ownership after Jan- uary 1, 1911, of a trade or business now carried on by a corporation, the corporation shall for the pur- poses of this title be deemed to have been in exist- ence prior to that date, and the net income and in- vested capital of such predecessor trade or business for all or any part of the prewar period prior to the organization of the corporation now carrying on such trade or business shall be deemed to have been the net income and invested capital of such corporation. If such predecessor trade or business was carried on by a partnership or individual the net income for the prewar period shall, under regu- W A R-P ROFITI AND ExCES 8-P ROFITsTaX 83 lations prescribed by the Commissioner with the ap- proval of the Secretary, be ascertained and returned as nearly as may be upon the same basis and in the same manner as provided for corporations in Title II, including a reasonable deduction for salary or compensation to each partner or the individual for personal services actually rendered. In the case of the organization as a corporation Option of partnership before July 1, 1919, of any trade or business in «' '«di^f ./ , . 1 • 1 . 1 • /. . taxed as corporaUon which capital is a material income-producing i actor and which was previously owned by a partnership or individual, the net income of such trade or busi- ness from January 1, 1918, to the date of such re- organization may at the option of the individual or partnership be taxed as the net income of a corpo- ration is taxed under Titles II and III; in which event the net income and invested capital of such trade or business shall be computed as if such cor- poration had been in existence on and after Janu- uary 1, 1918, and the undistributed profits or earn- ings of such trade or business shall not be subject to the surtax imposed in section 211, but amounts See page 16 distributed on or after January 1, 1918, from the earnings of such trade or business shall be taxed to the recipients as dividends, and all the provisions of Titles II and III relating to corporations shall, so far as practicable, apply to such trade or busi- ness ; Provided, That this paragraph shall not apply limitation to any trade or business the net income of which for the taxable year 1918 was less than 20 per centum of its invested capital for such year ; Provided fur- ther. That any taxpayer who takes advantage of this paragraph shall pay the tax imposed by section Capital stock tax 1000 of this Act and by the first subdivision of sec- See page 154 tion 407 of the Revenue Act of 1916,* as if such tax- *This subdivision imposed a tax of 60 cents on each $1,000 of the fair value of the capital stock in excess of $99,000. 84 Re VB y UB Act Readjustment of value of assets Reorganizations and consolidations after March 3, 1917 Where control remains with same persons, no increase in ralue of assets permitted. Where previous owner was not a corporation, value of transferred assets is cost of acquisition payer had been a corporation on and after January 1, 1918, with a capital stock having no par value. If any asset of the trade or business in existence both during the taxable year and any prewar year is included in the invested capital for the taxable year but is not included in the invested capital for such prewar year, or is valued on a different basis in computing the invested capital for the taxable year and such prewar year, respectively, then under rules and regulations to be prescribed by the Com- missioner with the approval of the Secretarj'^ such readjustments shall be made as are necessary to place the computation of the invested capital for such prewar year on the basis employed in deter- mining the invested capital for the taxable year. Sec. 331. In the case of the reorganization, con- solidation, or change of ownership of a trade or busi- ness, or change of ownership of property, after March 3, 1917, if an interest or control in such trade or business or property of 50 per centum or more remains in the same persons, or any of them, then no asset transferred or received from the previous owner shall, for the purpose of determining invested! capital, be allowed a greater value than would have been allowed under this title in computing the in- vested capital of such previous owner if such asset had not been so transferred or received; Provided, That if such previous owner was not a corporation,! then the value of any asset so transferred or re- ceived shall be taken at its cost of acquisition (at the] date when acquired by such previous o^vner) with proper allowance for depreciation, impairment, bet- terment or development, but no addition to the origi-! nal cost shall be made for any charge or expenditure! deducted as expense or otherwise on or after March 1, 1913, in computing the net income of such pre-j vious owner for purposes of taxation. W A BrP ROFITB AlTD ExCKS B-P ROFITSTax 8^ PART VIL— MISCELLANEOUS. Sec. 335. (a) That if a corporation (other than How to compute tax 1 • I • \ 1 j^ /> for fiscal year begin- a personal service corporation) makes return for a ning in 1917 and fiscal year beginning in 1917 and ending in 1918, ending in 1918 the tax for the first taxable year under this title shall be the sum of: (1) the same proportion of a tax for the entire period computed under Title II of the Revenue Act of 1917* which the portion of such period falling within the calendar year 1917 is of the entire period, and (2) the same propor- tion of a tax for the entire period computed under this title at the rates specified in subdivision (a) of section 301 which the portion of such period falling within the calendar year 1918 is of the entire period. Any amount heretofore or hereafter paid on ac- Credit for tax paid count of the tax imposed for such fiscal year by under Revenue Title II of the Revenue Act of 1917* shaU be A^»*^^^»^^ credited toward the payment of the tax imposed for such fiscal year by this title, and if the amount so paid exceeds the amount of the tax imposed by this title, the excess shall be credited or refunded to the corporation in accordance with the provisions of section 252. ^' '''' '^ (b) If a corporation makes return for a fiscal year Tax for fiscal year beginning in 1918 and ending in 1919, the tax for beginning in 1918 and such fiscal year under this title shaU be the sum of; '"**^"«^" ^^^^ ( 1 ) the same proportion of a tax for the entire pe- riod computed under subdivision (a) of section 301 which the portion of such period falhng within the calendar year 1918 is of the entire period, and (2) the same proportion of a tax for the entire period computed under subdivision (b) or (c) of section 301 which the portion of such period falhng within the calendar year 1919 is of the entire period. *This title imposed a war excess-profits tax at rates of 20%, 26%, 36%, 46%, and 60%. Rbtxvvb Act Tax on parfnertldps and personal semce corporations limited ^ calendar year 1917 Returns and payment of tax See pages 42, 57, 62 Limit on tax on profits resulting from prospecting (c) If a partnership or a personal service corpo- ration makes return for a fiscal year beginning in 1917 and ending in 1918, it shall pay the same pro- portion of a tax for the entire period computed un- der Title II of the Revenue Act of 1917* which the portion of such period falling within the calendar year 1917 is of the entire period. Any tax paid by a partnership or personal service corporation for any period begiiming on or after January 1, 1918, shall be immediately refunded to the partnership or corporation as a tax erroneously or illegally collected. Sec. 386. That every corporation, not exempt under section 304, shall make a return for the pur- poses of this title. Such returns shall be made, and the taxes imposed by this title shall be paid, at the same tunes and places, in the same manner, t and subject to the same conditions, as is provided in the case of returns and payment of income tax by corpo- rations for the purposes of Title II, and all the pro- visions of that title not inapplicable, including penalties, are hereby made applicable to tlie taxes imposed by this title. Sec. 337. That in the case of a bona fide sale of mines, oil or gas wells, or any interest therein, where] the principal value of the property has been demon-' strated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by this title attributable to such sale shall not exceed 20 per centum of the selling price of! such property or interest. 'This title imposed a war excess-profits tax at rates of 90%, 25%, S6%, 45%, and 60%. fFor use of uncertified checks and U. S. certificates of Indebted-j ness to pay taxes, see section 1314. TITLE IV. Estate Tax Sec. 400. That when used in this title — Definitions The term "executor" means the executor or ad- Executor ministrator of the decedent, or, if there is no execu- tor or administrator, any person who takes posses- sion of any property of the decedent; and The term "collector" means the collector of in- collector ternal revenue of the district in which was the domi- cile of the decedent at the time of his death, or, if there was no such domicile in the United States, then the collector of the district in which is situated the part of the gross estate of the decedent in the United States, or, if such part of the gross estate is situated in more than one district, then the collector of internal revenue of such district as may be desig- nated by the Commissioner. Sec. 401. That (in lieu of the tax imposed by Tax on transfer of Title II of the Revenue Act of 1916, as amended, net estate and in lieu of the tax imposed by Title IX of the Revenue Act of 1917) a tax equal to the sum of the following percentages of the value of the net estate (determined as provided in section 403) is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act, whether a resident or nonresident of the United Tax rates States: 1 per centum of the amount of the net estate not in excess of $50,000 ; 2 per centum of the amount by which the net 87 1 Rbtb vuK Act Tax ralM continued estate exceeds $50,000 and does not exceed $150,- 000; 8 per centum of the amount by which the net estate exceeds $150,000 and does not exceed $250,- 000; 4 per centum of the amount by which the net estate exceeds $250,000 and does not exceed $450,- 000; 6 per centum of the amount by which the net estate exceeds $450,000 and does not exceed $750,- 000; 8 per centum of the amount by which the net eistate exceeds $750,000 and does not exceed $1,- 000,000 ; 10 per centum of the amount by which the net estate exceeds $1,000,000 and does not exceed $1,- 500,000 ; 12 per centum of the amount by which the net estate exceeds $1,500,000 and does not exceed $2,- 000,000 ; 14 per centum of the amount by which the net estate exceeds $2,000,000 and does not exceed $8,- 000,000; 16 per centum of the amount by which the net estate exceeds $8,000,000 and does not exceed $4,- 000,000; 18 per centum of the amount by which the net estate exceeds $4,000,000 and does not exceed $5,- 000,000; 20 per centum of the amount by which the net estate exceeds $5,000,000 and does not exceed $8,- 000,000 ; 22 per centum of the amount by which the net estate exceeds $8,000,000 and does not exceed $10,- 000,000 ; and 25 per centum of the amount by which the net estate exceeds $10,000,000. Estate Tax 89 The taxes imposed by this title or by Title II of Exemption of estates the Revenue Act of 1916 (as amended by the Act ^y7/"*/„^"f,^ entitled "An Act to provide increased revenue to rm'^dLnTpresent defray the expenses of the increased appropriations war for the army and navy and the extensions, of for- tifications, and for other purposes," approved March 3, 1917) or by Title IX of the Revenue Act of 1917, shall not apply to the transfer of the net estate of any decedent who has died or may die while serving in the military or naval forces of the United States in the present war or from injuries received or disease contracted while in such service, and any such tax collected upon such transfer shall be refunded to the executor. Sec. 402. That the value of the gross estate of Value of gross estate the decedent shall be determined by including the ""^"*^®** value at the time of his death of all property, real or personal, tangible or intangible, wherever situ- ated — (a) To the extent of the interest therein of the Property in charge of decedent at the time of his death which after his *"'"*•'' death is subject to the payment of the charges against his estate and the expenses of its adminis- tration and is subject to distribution as part of his estate; (b) To the extent of any interest therein of the interest of surviving surviving spouse, existing at the time of the dece- ***""" dent's death as dower, courtesy, or by virtue of a statute creating an estate in lieu of dower or courtesy ; (c) To the extent of any interest therein of which Transfers in con- the decedent has at any time made a transfer, or ®"'**'®"" with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this act), except in 90 RsTsvuB Act Interestt held jointly or in entirety Property patung by will or deed Insurance Net estate of resident Deductions: Expenses and losses case of a bona fide sale for a fair consideration in money or money's worth. Any transfer of a mate- rial part of his property in the nature of a final dis- position or distribution thereof, made by the dece- dent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title; (d) To the extent of the interest therein held joint- ly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the de- cedent; (e) To the extent of any property pasting under a general power of appointment exercised by the decedent (1) by will, or (2) by deed executed in contemplation of, or intended to take effect in pos- session or enjoyment at or after, his death, except in case of a bona fide sale for a fair consideration in money or money's worth ; and (f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his onu life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life. Sec. 403. That for the purpose of the tax the value of the net estate shall be determined — (a) In the case of a resident, by deducting from the value of the gross estate — ( 1 ) Such amounts for funeral expenses, adminis- tration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement Estate Tax 91 of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses are not compensated for by insurance or otherwise, and such amounts reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered, but not in- cluding any income taxes upon income received after the death of the decedent, or any estate, suc- cession, legacy, or inheritance taxes ; (2) An amount equal to the value at the time of Property on which the decedent's death of any property, real, personal, ^^be1n*'^d ^ Mn or mixed, which can be identified as having been Hve years received by the decedent as a share in the estate of any person who died within five years prior to the death of the decedent, or which can be identified as having been acquired by the decedent in exchange for property so received, if an estate tax under the Revenue Act of 1917 or under this Act was col- lected from such estate, and if such property is in- cluded in the decedent's gross estate ; (8) The amount of all bequests, legacies, devises. Bequests for public, or gifts, to or for the use of the United States, any ^j^^^^^^^^^^^ ,3, state, territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any corporation organized and operated exclusively for rehgious, charitable, scientific, literary, or educational pur- poses, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the ben- efit of any private stockholder or individual, or to a trustee or trustees exclusively for such religious, charitable, scientific, literary, or educational pur- poses. This deduction shall be made in case of the 93 Rbfs ir UB Act Eiemption Net estate of non- resident Deductions: Proportion of •xpenses and losses Property on which Federal estate tai has been paid within five J9MI% Bequests for public, charitable or educa- tional purposes estates of all decedents who have died since De- cember 81, 1917; and (4) An exemption of $50,000; (b) In the case of a nonresident, by deducting from the value of that part of his gross estate which at the time* of his death is situated in the United States — (1) That proportion of the deductions specified in paragraph (1) of subdivision (a) of this section which the value of such part bears to the value of his entire gross estate, wherever situated, but in no case shall the amount so deducted exceed 10 per centtmfi of the value of that part of his gross estate which at the time of his death is situated in the United States; (2) An amount equal to the value at the time of the decedent's death of any property, real, personal, or mixed, which can be identified as having been received by the decedent as a share in the estate of any person who died within five years prior to the death of the decedent, or which can be identified as having been acquired by the decedent in ex- change for property so received, if an estate tax under the Revenue Act of 1917 or under this Act was collected from such estate, and if such property is included in that part of the decedent's gross es- tate which at the time of his death is situated in the United States ; and (8) The amount of all bequests, legacies, devises, or giftsi, to or for the use of the United States, any state, territory, any political subdivision thereof or the District of Columbia, for exclusively public purposes, or to or for the use of any domestic corporation organized and operated exclusively for, religious, charitable, scientific, literary, or educa- tional purposes, including the encouragement of art and the prevention of cruelty to children or Estate Tax 93 animals, no part of the net earnings of which inures to the benefit of any private stockholder or individ- ual, or to a trustee or trustees exclusively for such reUgious, charitable, scientific, literary, or educa- tional purposes within the United States. This deduction shall be made in case of the estates of all decedents who have died since December 31, 1917; and No deduction shall be allowed in the case of a Return must be filed nonresident unless the executor includes in the re- to obtain deductions turn required to be filed under section 404 the value at the time of his death of that part of the gross estate of the nonresident not situated in the United States. For the purpose of this title stock in a domestic Property within U.S. corporation owned and held by a nonresident de- construed cedent, and the amount receivable as insurance upon the life of a nonresident decedent where the insurer is a domestic corporation, shall be deemed property within the United States, and any prop- erty of which the decedent has made a transfer or with respect to which he has created a trust, within the meaning of subdivision (c) of section 402, shall be deemed to be situated in the United States, if so situated either at the time of the transfer or the creation of the trust, or at the time of the decedent's death. In the case of any estate in respect to which the Redetermination of tax under existing law has been paid, if necessary to *»% allow the benefit of the deduction under paragraph (3) of subdivision (a) or (b) the tax shall be rede- termined and any excess of tax paid shall be re- funded to the executor. Sec. 404. That the executor, within sixty days Executor's notice after qualifying as such, or after coming into pos- session of any property of the decedent, whichever event first occurs, shall give written notice thereof 94 RsvBKUs Act Relnrn Where return must be made ^Metsmenl Return by collector When tax is dot to the collector. The executor shall also, at such times and in such manner as may be required by regulations made pursuant to law, file with the col- lector a return under oath in duplicate, setting forth (a) the value of the gross estate of the decedent at the time of his death, or, in case of a nonresident, of that part of his gross estate situated in the United States; (b) the deductions allowed under section 403; (c) the value of the net estate of the decedent as defined in section 403; and (d) the tax paid or payable thereon; or such part of such information as may at the time be ascertainable and such sup- plemental data as may be necessary to establish the correct tax. Return shall be made in all cases where the gross estate at the death of the decedent exceeds $50,000, and in the case of the estate of every nonresident any part of whose gross estate is situated in the United States. If the executor is unable to make a complete return as to any part of the gross estate of the decedent, he shall include in his return a de- scription of such part and the name of every person holding a legal or beneficial interest therein, and upon notice from the collector such person shall in like manner make a return as to such part of the gross estate. The Commissioner shall make all as- sessments of the tax under the authority of existing administrative special and general provisions of law relating to the assessment and collection of taxes. Sec. 405. That if no administration is granted upon the estate of a decedent, or if no return is filed as provided in section 404, or if a return contains a false or incorrect statement of a material fact, the collector or deputy collector shall make a return and the Commissioner shall assess the tax thereon. Sec. 406. That the tax shall be due one year after the decedent's death; but in anv case where the EstateTax M Commissioner finds that payment of the tax within one year after the decedent's death would impose undue hardship upon the estate, he may grant an extension of time for the payment of the tax for a period not to exceed three years from the due date. If the tax is not paid within one year and 180 days after the decedent's death, interest at the rate of 6 per centum per annum from the expiration of one year after the decedent's death shall be added as part of the tax. Sec. 407. That the executor shall pay the tax to Payment the collector or deputy collector. If the amount of the tax can not be determined, the payment of a sum of money sufficient, in the opinion of the col- lector, to discharge the tax shall be deemed payment in full of the tax, except as in this section otherwise Refund of over- provided. If the amount so paid exceeds the payments amount of the tax as finally determined, the Com- missioner shall refund such excess to the executor. If the amount of the tax as finally determined ex- Underpayments ceeds the amount so paid, the collector shall notify the executor of the amount of such excess and de- mand payment thereof. If such excess part of the tax is not paid within thirty days after such noti- fication, interest shall be added thereto at the rate of 10 per centum per annum from the expiration of such thirty days' period until paid, and the amount of such excess shall be a lien upon the en- tire gross estate, except such part thereof as may have been sold to a bona fide purchaser for a fair consideration in money or money's worth. The collector shall grant to the person paying Receipts the tax duplicate receipts, either of which shall be sufficient evidence of such payment, and shall en- title the executor to be credited and allowed the amount thereof by any court having jurisdiction to audit or settle his accounts. W RevbkubAct Default in payment Sec. 408. That if the tax herein imposed is not "'*" paid within 180 days after it is due, the collector shall, unless there is reasonable cause for further delay, proceed to collect the tax under the provi- sions of general law, or commence appropriate proceeding* in any court of the United States, in the name of the United States, to subject the prop- erty of the decedent to be sold under the judgment or decree of the court. From the proceeds of such sale the amount of the tax, together with the costs and expenses of every description to be allowed by the court, shall be first paid, and the balance shall be deposited according to the order of the court, to be paid imder its direction to the person entitled thereto. Reimburtement where Jf ^J^g ^^^ qj, ^j^y p^j.^ thereof is paid by, Or Col- ihan'executor ** ^ Icctcd out of that part of thc cstatc passing to or in the possession of, any person other than the exec- utor in his capacity as such, such person shall be entitled to reimbursement out of any part of the estate still undistributed or by a just and equitable contribution by the persons whose interest in the estate of the decedent would have been reduced if the tax had been paid before the distribution of the estate or whose interest is subject to equal or prior liability for the payment of taxes, debts, or other charges against the estate, it being the purpose and intent of this title that so far as is practicable and Tax to be paid before unlcss otherwisc directed by the will of the decedent diatribuiion the tax shall be paid out of the estate before its dis- tribution. If any part of the gross estate consists of proceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor, the executor shall be entitled to recover from such beneficiar\^ such portion of the total tax paid as the proceeds, in excess of $40,000, of such policies bear to the net estate. If there is EiTATE Tax 97 more than one such beneficiary the executor shall be entitled to recover from such beneficiaries in the same ratio. Sec. 409. That unless the tax is sooner paid in Tax Uen for lo yem full, it shall be a lien for ten years upon the gross estate of the decedent, except that such part of the gross estate as is used for the payment of charges against the estate and expenses of its administra- tion, allowed by any court having jurisdiction there- of, shall be divested of such lien. If the Commis- sioner is satisfied that the tax liability of an estate has been fully discharged or provided for, he may, under regulations prescribed by him with the ap- proval of the Secretary, issue his certificate releas- ing any or all property of such estate from the lien herein imposed. If (a) the decedent makes a transfer of, or ere- Transfers or tnitts , , , . , 1 , . , . made in contemplation ates a trust with respect to, any property m con- ^,f jg^ji, templation of or intended to take eflFect in posses- sion or enjoyment at or after his death (except in the case of a bona fide sale for a fair consideration in money or money's worth) or (b) if insurance '"««'««" passes under a contract executed by the decedent in favor of a specific beneficiary, and if in either case the tax in respect thereto is not paid when due. Transferee liable then the transferee, trustee, or beneficiary shall be personally liable for such tax, and such property, to the extent of the decedent's interest therein at the time of such transfer, or to the extent of such beneficiary's interest under such contract of insur- ance, shall be subject to a like lien equal to the amount of such tax. Any part of such property sold by such transferee or trustee to a bona fide purchaser for a fair consideration in money or money's worth shall be divested of the lien and a like lien shall then attach to all the property of such transferee or trustee, except any part sold to a Rs VB s UB Act in Penalty for false ttatemenU Penalty for failure !• file notice or return, or to furnish in- formation bona fide purchaser for a fair consideration money or money's worth. Sec. 410. That whoever knowingly makes any false statement in any notice or return required to be filed under this title shall be liable to a penalty of not exceeding $5,000, or imprisonment not ex- ceeding one year, or both. Whoever fails to comply with any duty imposed upon him by section 404, or, having in his possession or control any record, file, or paper, containing or supposed to contain any information concerning the estate of the decedent, or, having in his possession or control any property comprised in the gross estate of the decedent, fails to exhibit the same upon request to the Commissioner or any collector or law officer of the United States, or his duly authorized deputy or agent, who desires to examine the same in the performance of his duties under this title, shall be liable to a penalty of not exceeding $500, to be recovered, with costs of suit, in a civil action in the name of the United States. TITLE V. Tax on Transportation and Other Facilities, and on Insurance Transportation and Other Facilities. Sec. 500. That from and after April 1, 1919, Tax on transportation there shall be levied, assessed, collected, and paid, '^^t® ^'^"ti^e in lieu of the taxes imposed by section 500 of the Revenue Act of 1917 — (a) A tax equivalent to 3 per centum of the Taxonfreight, amount paid for the transportation on or after such ^ p®"" ""* date, by rail or water or by any form of mechanical motor power when in competition with carriers by rail or water, of property by freight transported from one point in the United States to another; and a like tax on the amount paid for such transporta- tion within the United States of property trans- ported from a point without the United States to a point within the United States ; (b) A tax of 1 cent for each 20 cents or frao- Tax on express, tion thereof of the amount paid to any person for ic for each 20c the transportation on or after such date, by rail or ^ *^^* water or by any form of mechanical motor power when in competition with express by rail or water, of any package, parcel, or shipment, by express, transported from one point in the United States to another; and a like tax on the amount paid for such transportation within the United States of property transported from a point without the United States to a point within the United States; (c) A tax equivalent to 8 per centimi of the Tax on passenger amount paid for the transportation on or after ««'"^*=«' ^ p®»" ""* 99 100 Rktsvub Act Exceptions LimiUtion of lax on carrier* by water competing with foreign lines Tax on Pullman accommodations, 8 per cent Tax on pipe line transportation, 8 per cent Tax on telegraph, telephone, cable and radio service such date of persons by rail or water, or by any form of mechanical motor power on a regular es- tablished line when in competition with carriers by rail or water, from one point in the United States to another or to any point in Canada or Mexico, where the ticket or order therefor is sold or issued in the United States, not including the amount paid for commutation or season tickets for trips less than thirty miles, or for transportation the fare for which does not exceed 42 cents; Provided, That where such water transportation lines are in competition be- , tween American ports with foreign water transpor- tation lines from adjacent foreign ports, the tax im- posed under this subdivision on amounts paid for water transportation between American ports shall not exceed the amount of the transportation tax to which such foreign water transportation lines are subjected by their Grovernment corresponding to this tax; (d) A tax equivalent to 8 per centum of the amount paid for seats, berths, and staterooms in parlor cars, sleeping cars, or on vessels, used on or after such date in connection with transportation upon wliich tax is imposed by subdivision (c) ; (e) A tax equivalent to 8 per centum of the amount paid for the transportation on or after such date of oil by pipe line; (f) In the case of each telegraph, telephone, ca- ble, or radio, dispatch, message, or conversation, which originates on or after such date within the United States, and for the transmission of which the charge is more than 14 cents and not more than 50 cents, a tax of 5 cents; and if the charge is more than 50 cents, a tax of 10 cents; Provided, That only one payment of such tax shall be required, notwithstanding the lines or stations of one or more ■» » O ',» t 1 » 1 ■', , » 1 >> Tbanspobtatiox and I nsub a's^ce* > >>^' '^.'i^:i '* 101 » > '» » » persons are used for the transmission of such dis- patch, message, or conversation; and (g) A tax equivalent to 10 per centum of the Tax on leased wires, amount paid after such date to any telegraph or ^^p®'^®"*- telephone company for any leased wire or talking circuit special service furnished after such date. This subdivision shall not apply to the amount paid Exceptions: for so much of such service as is utilized ( 1 ) in the (i) News wires collection and dissemination of news through the public press, or (2) in the conduct, by a common ,1 I ■11 /»«i(2) Carrier's own carrier or telegraph or telephone company, of its |,u,iness business as such. (h) No tax shall be imposed under this section No tax on services upon any payment received for services rendered to *® ^^^^^^^ ^^ **«'« the United States or to any State or Territory or ^®^®'""*®" * the District of Columbia. The right to exemption under this subdivision shall be evidenced in such manner as the Commissioner, with the approval of the Secretary, may by regulation prescribe. Sec. 501. (a) That the taxes imposed by section Tax to be paid by 500 shall be paid by the person paying for the ser- p®""*®"* *^^^^ vices or facilities rendered. (b) If a mileage book used for transportation Transportation or accommodation was purchased before November purchased prior to 1, 1917, or if cash fare is paid, the tax imposed by ^^"'^"**"' '' ^^^^ section 500 shall be collected from the person pre- senting the mileage book, or paying the cash fare, by Cash fare the conductor or other agent, when presented for such transportation or accommodation, and the amount so collected shall be paid to the United States in such manner and at such times as the Com- missioner, with the approval of the Secretary, may prescribe; if a ticket (other than a mileage book) was bought and partially used before November 1, 1917, it shall not be taxed, but if bought but not so used before section 500 takes effect, it shall not be valid for passage until the tax has been paid and 192 Rbtb VUB Act Taxes apply to specified terrices, whether or not agent is a common carrier Tax where carrier receives less than usual charge No tax on trans- portation of company material All pipe line trans- portation of oil taxed such payment evidenced on the ticket in such man- ner as the Commissioner, with the approval of the Secretary, may by regulation prescribe. (c) The taxes imposed by section 500 shall apply to all services of facilities specified in such section when rendered for hire, whether or not the agency rendering them is a common carrier. In case a car- rier (other than a pipe line) principally engaged in rendering transportation services or facihties for hire does not, because of its ownership of the goods transported, or for any other reason, receive the' amount which as a carrier it would otherwise charge, such carrier shall pay a tax equivalent to the tax which would be imposed upon the transportation of] such goods if the carrier received payment for such transportation, such tax, if it can not be computed from actual rates or tariffs of the carrier, to be com-i puted on the basis of the rates or tariffs of other' carriers for like services as determined by the Com- missioner. In the case of any carrier (other than^ a pipe line) the principal business of which is transport goods belonging to it on its own account' and which only incidentally renders services for hire, the tax shall apply to such services or facihties only as are actually rendered by it for hire. Nothing] in this or the preceding section shall be construed as imposing a tax (1) upon the transportation of any conmaodity which is necessary for the use of the carrier in the conduct of its business as such and is intended to be so used or has been so used; or (2) upon the transportation of company material trans- ported by one carrier, which constitutes a part of a. railroad system, for another carrier which is also a part of the same system. (d) The tax imposed by subdivision (e) of sec- tion 500 shall apply to all transportation of oil by pipe hne. In case no charge for transportation is Tbanspobtatiok axd Insukance 103 made, by reason of ownership of the commodity transported, or for any other reason, the person transporting by pipe line shall pay a tax equivalent to the tax which would be imposed if such person received payment for such transportation, and if the tax can not be computed from actual bona fide rates or tariffs, it shall be computed ( 1 ) on the basis of the rates or tariflPs of other pipe lines for Uke services, as determined by the Commissioner, or (2) if no such rates or tariffs exist, on the basis of a reasonable charge for such transportation, as de- termined by the Commissioner. Sec. 502. That each person receiving any pay- Returns and payment ments referred to in section 500 shall collect the of tax collected amount of the tax, if any, imposed by such section from the person making such payments, and shall make monthly returns under oath, in duplicate, and pay the taxes so collected and the taxes imposed upon it under subdivision (c) or (d) of section 501 to the collector of the district in which the principal office or place of business is located. No carrier collecting the taxes imposed by sub- Separate listing in division (a) or (b) of section 500 shall be required bill of lading not to list the amount of such tax separately in any bill '^®**"'^* of lading, freight or express receipt, or other similar document, if the total amount of the transportation charge and the tax is stated therein. Any person making a refund of any payment up- Refunds of tax on which tax is collected under this section may re- coUected pay therewith the amount of the tax collected on such payment; and the amount so repaid may be credited against amounts included in any subse- quent monthly return. The returns required under this section shall con- Returns, when and tain such information, and be made at such times how made and in such manner, as the Commissioner, with the 104 RiTsir UB Act Payment of Uz to collector Ponalty approval of the Secretary, may by regulation pre- scribe. The tax shall, without assessment by the Commis- sioner or notice from the collector, be due and pay- able to the collector at the time so fixed for filing the return. .If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Taz on insurance policies Date efiectiT* Life insurance Industrial insurance fife insurance Insurance. Sec. 508. That from and after April 1, 1919, there shaU be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 504 of the Revenue Act of 1917, the following taxes on the issuance of insurance policies, including, in the case of policies issued outside the United States (except those taxable under subdivision 15 of Schedule A of Title XI), their delivery within the United States by any agent or broker, whether acting for the insurer or the insured ; such taxes to. be paid by the insurer, or by such agent or broker: (a) Life insurance: A tax equivalent to 8 cents on each $100 or fractional part thereof of the amount for which any life is insured under any pohcy of insurance, or other instrument, by what- ever name the same is called ; Provided, That on all policies for life insurance only by which a life is in- sured not in excess of $500, issued on the industrial or weekly or monthly payment plan of insurance, the tax shall be 40 per centum of the amount of the first weekly premium or 20 per centum of the amount of the first monthly premium, as the case may be; Provided further. That on poUcies of group hfe insurance, covering groups of not less than 25 lives in the employ of the same person, for TraxsfortatioxandInsubanck 105 the benefit of persons other than the employer, the tax shall be equivalent to 4 cents on each $100 of the aggregate amount for which the group policy is issued and of any net increase in the amount of the insurance under such policy; And provided fur- ther, That on all policies covering Uf e, health, and Combined life, health accident insurance combined in one pohcy by which *"** accident a life is insured not in excess of $500, issued on the '"•"*"^® industrial, or weekly or monthly payment plan of insurance, the tax shall be 40 per centum of the amount of the first weekly premiimi or 20 per cen- tum of the amount of the first monthly premium, as the case may be ; (b) Marine, inland, and fire insurance: A tax Marine, inland and equivalent to 1 cent on each dollar or fractional part ^® insurance thereof of the premium charged under each policy of insurance or other instrument by whatever name the same is called whereby insurance is made or re- newed upon property of any description (including rents or profits), whether against peril by sea or inland waters, or by fire or lightning, or other peril; (c) Casualty insurance: A tax equivalent to 1 Casualty insurance cent on each dollar or fractional part thereof of the premium charged under each pohcy of insurance or obhgation of the nature of indemnity for loss, dam- age, or liability (except bonds and policies taxable under subdivision 2 of schedule A of Title XI) is- sued or executed or renewed by any person transact- ing the business of employer's habiUty, workmen's compensation, accident, health, tornado, plate glass, steam boiler, elevator, burglary, automatic sprin- kler, automobile, or other branch of insurance (ex- cept life insurance, and insurance described and taxed in the preceding subdivision) ; Provided, That in case of policies of insurance issued on the Casualty policies industrial or weekly or montlily payment plan the on industrial plan tax shall be 40 per centum of the amount of the 100 Rbvs V us Act Exempt potidei See page 44 Returns Payment Penalty first weekly premium or 20 per centum of the amount of the first monthly premium, as the case may be; (d) Policies issued by any corporation enumer- ated in section 231, and policies of reinsurance, shall be exempt from the taxes imposed by this section. Sec. 504. That every person issuing policies of insurance upon the issuance of which a tax is im- posed by section 503 shall make montlily returns under oath, in duplicate, and pay such tax to the collector of the district in which the principal office or place of business of such person is located. Such returns shall contain such information and be made at such times and in such manner as the Commis- sioner, with the approval of the Secretary, may by regulation prescribe. The tax shall, without assessment by the Coomiis- sioner or notice from the collector, be due and pay- able to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. TITLE VI. Tax on Beverages Sec. 600. (a) That there shall be levied and col- oisUUed «pirii« leeted on all distilled spirits now in bond or that have been or that may be hereafter produced in or imported into the United States, except such dis- tilled spirits as are subject to the tax provided in section 604, in lieu of the internal-revenue taxes now imposed thereon by law, a tax of $2.20 (or, if with- Rate of tax drawn for beverage purposes or for use in the manu- facture or production of any article used or in- tended for use as a beverage, a tax of $6.40) on each proof gallon, or wine gallon when below proof, and a proportionate tax at a like rate on all fractional parts of such proof or wine gallon, to be paid by the distiller or importer when withdrawn, and col- lected under the provisions of existing law. (b) That the tax imposed by subdivision (a) on Spirits held in bond distilled spirits intended for beverage purposes shall «* •■^*"** ®' prohibition not be due or payable on such spirits while stored in any distillery, bonded warehouse, or special or gen- eral bonded warehouse, and which, pursuant to any Act of Congress or proclamation of the President of the United States, cannot be lawfully sold or re- moved from any such warehouse during the period of prohibition fixed by such Act or proclamation; and all warehousing bonds or transportation and warehousing bonds conditioned for the payment of tax on any such spirits so stored on the date such prohibition takes effect shall as to all such spirits actually so stored be cancelled and discharged, pro- lOT 108 RevexueAct vided the distiller of such spirits shall in lieu of such bonds and prior to their cancellation execute a bond in a penal sum of not less than $10,000, with sure- ties satisfactory to the collector of the district, con- ditioned that the principal shall, during the period * of such prohibition, safely keep or cause to be kept in good condition all such spirits and the warehouse in which the same are stored, and shall not remove or suffer to be removed from warehouse, contrary to law, any such spirits during the period of such prohibition ; and the bond herein prescribed shall be in such further sum and shall contain such further i conditions as the Commissioner, with the approval of the Secretary, may by regulations require. The distiller may, subject to the provisions of this sec- tion, be permitted to retain in any such bonded | warehouse distilled spirits on which, under the terms ^ of any existing bond, the tax imposed thereon be- j comes due and payable prior to the date such pro- hibition takes effect; Provided, That on the re- moval of such prohibition the distiller shall, as to all spirits as to which the bonded period fixed by | law has not expired and which remain stored in warehouse, execute new and satisfactory bond in the form required by existing law, conditioned for * the payment of the tax on all such spirits; and all provisions of existing law relating to such bonded warehouses, or the storage of spirits therein, or to the execution of new or additional bonds, so far as applicable, shall continue in force as to all distilled spirits rebonded under the provisions of this section. Allowance for leakage Upou the withdrawal of distlllcd spirits from while in bonded boudcd warehousc, after the period of prohibition ware ouse j^^^ ended, and under the conditions imposed by section 50 of an Act entitled "An Act to reduce tax- ation, to provide revenue for the support of the Government, and for other purposes," approved Tax on Bevebaoeb lOB August 28, 1894, an allowance for loss by leakage or other unavoidable cause, not exceeding one proof gallon as to packages of a capacity of not less than 40 wine gallons, may be made in addition to that provided in said section 50, as amended; and a like additional allowance of one proof gallon as to each package withdrawn may be made for each period of four months, or fraction thereof, for such spirits as shall have remained in warehouse during the period of prohibition and after the expiration of the maxi- mum leakage period fixed by that section. Under regulations prescribed by the Secretary, imported spirits, any imported distilled spirits, wines or other liquors ^"e* *»<* ^<»"®" "*y which may be in any customs bonded warehouse '*"**"*" under the customs laws on the date such prohibition takes effect shall be permitted to remain therein without payment of any taxes or duties thereon, beyond the three-year period provided in section 2971 of the Revised Statutes, during such period of prohibition; and may be exported at any time during such extended period. Any imported spirits, wines or other liquors as to which the three-year bonded period may expire after the passage of this Act and prior to the date such prohibition takes ef- fect may at the option of the owner remain in bond during such period of prohibition. (c) In lieu of the internal-revenue tax now im- imported perfumes, posed thereon by law there shall be levied and col- containing distilled lected upon all perfumes hereafter imported into **""** the United States containing distilled spirits, a tax of $1.10 per wine gallon, and a proportionate tax at a like rate on all fractional parts of such wine gallon. Such tax shall be collected by the collector of customs and deposited as internal-revenue col- lections, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe. 110 Revekue Act Importation of spirits prohibited Exceptions Transfer of spirits to warehouse Regulations govern- ing transfer Sec. 601. That no distilled spirits produced after October 3, 1917, shall be imported into the United States from any foreign country, or from the Vir- gin Islands (unless produced from products the growth of such islands, and not then into any State or Territory or District of the United States in which the manufacture or sale of intoxicating hquor is prohibited), or from Porto Rico, or the PhiUppine Islands. Under such rules, regulations, and bonds as the Secretary may prescribe, the pro- visions of this section shall not apply to distilled spirits imported for other than (1) beverage pur- poses or (2) use in the manufacture or production of any article used or intended for use as a bever- age. Sec. 602. That at registered distilleries produc- ing alcohol, or other high-proof spirits, packages may be filled with such spirits reduced to not less than one hundred proof from the receiving cisterns and tax paid without being entered into bonded warehouse. Such spirits may be also transferred from the receiving cisterns at such distilleries, by means of pipe lines, direct to storage tanks in the bonded warehouse and may be warehoused in such storage tanks. Such spirits may be also transferred in tanks or tank cars to general bonded warehouses for storage therein, either in storage tanks in such warehouses or in the tanks in which they were transferred. Such spirits may also be transferred from receiving cisterns or warehouse storage tanks to barrels, drums, tanks, tank cars, or other ap- proved containers, and may be transported in such containers for exportation or other lawful purposes. The Commissioner, with the approval of the Secre- tary, is hereby empowered to prescribe all neces- sary regulations relating to the drawing oflF, trans- ferring, gauging, storing, and transporting of such Tax ok Beverages IIJ spirits; the records to be kept and returns to be made; the size and kind of packages and tanks to be used; the marking, branding, numbering, and stamping of such packages and tanks ; the kinds of stamps, if any, to be used ; and the time and manner of paying the tax; the kind of bond and the penal sum of same. The tax prescribed by law must be paid before such spirits are removed from the dis- tillery premises, or from general bonded ware- house in the case of spirits transferred thereto, ex- cept as otherwise provided by law. Under such regulations as the Commissioner, with the approval of the Secretary, may prescribe, distilled spirits may hereafter be drawn from re- ceiving cisterns and deposited in distillery ware- houses without having affixed to the packages con- taining the same, distillery warehouse stamps, and such packages, when so deposited in warehouse, may be withdrawn therefrom on the original gauge where the same have remained in such warehouse for a period not exceeding thirty days from the date of deposit. Under such regulations as the Commissioner, Ethyl alcohol used with the approval of the Secretary, may prescribe, ^®' non-beverage the manufacture, warehousing, withdrawal, and p""^""* shipment, under the provisions of existing law, of ethyl alcohol for other than (1) beverage purposes or ( 2 ) use in the manufacture or production of any article used or intended for use as a beverage, and Denatured alcohol denatured alcohol, may be exempted from the pro- visions of section 3283 of the Revised Statutes. The Commissioner, with the approval of the '^''^"'*^**"^'"[ ^ ,, , Secretary, may by regulations exempt distillers of ^u2o\^ "* ** * ethyl alcohol, for use in the production of munitions of war, or for other non-beverage purposes, from so much of the provisions of sections 3264, 3285, or 3309 of the Revised Statutes, and Acts amenda- 112 Regulations for transfer for de> naturation Allowances for leakage and loss Floor tax on spirits in retailers' hands Rz VENUE Act tory thereof, respecting the survey of distilleries the period of fermentation, the fQling and emptying of fermenting tubs, and assessments, as, in his judg- ment, may be expedient; Provided, That the bond prescribed in section 3260 of the Revised Statutes shall, in the cases herein provided, be in such sum and contain such further conditions as the Conmiis- sioner may require. Sec. 603. That under such regulations as the Commissioner, with the approval of the Secretary, may prescribe, ethyl alcohol of not less than 180 de- grees proof, produced at any central distilling and denaturing plant estabUshed under the provisions of subsection 2, paragraph N, of section IV of the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," approved October 3, 1913, may be re- moved from such plant to any central denaturing bonded warehouse for denaturation, or may, before or after denaturation, be removed from such plant or from such denaturing bonded warehouse, free of tax, for use of the United States or for shipment to any nation while engaged against the German Gov- ernment in the present war, and the removal herein authorized may be made in such tank vessels, tank cars, drums, casks, or other containers as may be approved by the Commissioner. It shall be lawful, under regulations prescribed by the Commissioner, with the approval of the Secretary, for an allowance to be made for leakage or loss by unavoidable acci- dent and without fault or negligence of the distiller, owner, carrier, or his agents or employees, which! may occur during the transportation of such spirits] or while the same are lawfully stored on either of] the premises herein described. Sec. 604. That upon all distilled spirits producec in or imported into the United States upon which! I Tax ok Beverages 118 the internal-revenue tax now imposed by law has been paid, and which, on the day after the passage of this Act, are held by any person and intended for sale or for use in the manufacture or production of any article intended for sale, there shall be levied, assessed, collected, and paid a floor tax of $3.20 if intended for sale for beverage purposes or for use in the manufacture or production of any article used or intended for use as a beverage on each proof gal- lon, and a proportionate tax at a like rate on all fractional parts of such proof gallon. Sec. 605. That in addition to the tax imposed by Rectified spintc this Act on distilled spirits and wines, there shall be levied, assessed, collected, and paid, in lieu of the tax imposed by section 304 of the. Revenue Act of 1917, a tax of 30 cents on each proof gallon and a proportionate tax at a like rate on all fractional parts of such proof gallon on all distilled spirits or wines hereafter rectified, purified, or refined in such manner, and on all mixtures hereafter produced in such manner, that the person so rectifying, purify- ing, refining, or mixing the same is a rectifier within the meaning of section 3244 of the Revised Statutes, as amended ; Provided, That this tax shall not ap- ply to gin produced by the redistillation of a pure cin spirit over juniper berries and other aromatics. Upon all such articles heretofore produced, and Floor ux on rectified which on the day after the passage of this Act are "p*"'* held by any person and intended for sale, there shall be levie^, assessed, collected, and paid a floor tax of 15 cents on each proof gallon, and a proportionate tax at a like rate on all fractional parts of each proof gallon; and all such distilled spirits so held and not contained in the distillers' original stamped pack- ages, or in bottles or other containers bearing the distillers' original labels, shall for the purpose of this section be regarded as rectified spirits. 114 Reduction in proof prohilnted Exemptions Regulations to be uniform Re VE NUE Act When the process of rectification is completed and the taxes prescribed by this section have been paid, it shall be unlawful for the rectifier or other dealer to reduce in proof or increase in volume such spirits or wine by the addition of water or other substance ; nothing herein contained shall, however, prevent a rectifier from using again in the process of rectification spirits already rectified and upon which the taxes have theretofore been paid. The taxes imposed by this section shall not attach to cordials or liqueurs on which a tax is imposed and paid under section 611 or 613, nor to the mixing and blending of wines, where such blending is for the sole purpose of perfecting such wines accord- ing to commercial standards, nor to blends made ex- clusively of two or more pure straight whiskies aged in wood for a period not less than four years and without the addition of coloring or fiavoring matter or any other substance than pure water and if not reduced below ninety proof; Provided, That such blended whiskies shall be exempt from tax under this section only when compounded under the im- mediate supervision of a revenue officer, in such tanks and under such conditions and supervision as the Commissioner, with the approval of the Secre- tary, may prescribe. 'All distilled spirits or wines taxable under this section shall be subject to uniform regulations con- cerning the use thereof in the manufacture, blend-j ing, compounding, mixing, marking, branding, and] sale of whisky and rectified spirits, and no discrimi-j nation whatsoever shall be made by reason of a dif- ference in the character of the material from which] same may have been produced. The business of a rectifier of spirits shall be car-| ried on, and the tax on rectified spirits shall be paid, under such rules, regulations, and bonds as may be! 4 I Tax ov Beveraoes US prescribed by the Commissioner, with the approval of the Secretary. Whoever violates any of the provisions of this sec- Penalties tion shall be deemed to be guilty of a misdemeanor and, upon conviction, shall be fined not more than $1,000 or imprisoned not more than two years, and shall, in addition, be hable to double the tax evaded, together with the tax, to be collected by assessment or on any bond given. Sec. 606. That hereafter collectors shall not fur- Use of stamps nish wholesale liquor dealer's stamps in Ueu of and in exchange for stamps for rectified spirits unless the package covered by stamp for rectified spirits is to be broken into smaller packages. The Commissioner, with the approval of the Secretary, is authorized to discontinue the use of the following stamps whenever in his judgment the in- terests of the Government will be subserved thereby: Distillery warehouse, special bonded warehouse, special bonded rewarehouse, general bonded ware- house, general bonded retransfer, transfer brandy, export tobacco, export cigars, export oleomargar- ine, and export fermented-liquor stamps. Sec. 607. That the Commissioner, with the ap- installation of proval of the Secretary, is hereby authorized to re- »??»'«*"« f®/ • i T i*n • 1 • .'P • 1 T protection of the quire at distilleries, breweries, rectiiymg houses, and revenue wherever else in his judgment such action may be deemed advisable, the installation of meters, tanks, pipes, or any other apparatus for the purpose of protecting the revenue, and such meters, tanks, and pipes and all necessary labor incident thereto shall be at the expense of the person on whose premises the installation is required. Any such person refus- ing or neglecting to install such apparatus when so required by the Commissioner shall not be permitted to conduct business on such premises. 116 RiYEirux Act Beer and fermented liquor Fermented liquor used in distilling Transfers from brewery to distillery Sec. 608. That there shall be levied and collected on all beer, lager beer, ale, porter, and other similar fermented liquor, containing one-half of one per centum, or more, of alcohol, brewed or manufac- tured and hereafter sold, or removed for consump- tion or sale, within the United States, by whatever name such liquors may be called, in lieu of the in- ternal-revenue taxes now imposed thereon by law, a tax of $6.00 for every barrel containing not more than thirty-one gallons, and at a like rate for any other quantity or for the fractional parts of a barrel authorized and defined by law, to be collected under the provisions of existing law. Sec. 609. That from and after the passage of this Act taxable fermented liquors may be conveyed without payment of tax from the brewery premises where produced to a contiguous industrial distillery of either class established under the Act entitled "An Act to reduce tariflF duties and to provide reve- nue for the Government, and for other purposes," approved October 3, 1913, to be used as distilling material, and the residue from such distillation, con- taining less than one-half of 1 per centum of alco- hol by volume, which is to be used in making bev- erages, may be manipulated by cooling, flavoring, carbonating, settling, and filtering on the distillery premises or elsewhere. The removal of the taxable fermented liquor from the brewery to the distillery and the operation of the distillery and removal of the residue there- from shall be under the supervision of such officer or officers as the Commissioner shall deem proper, and the Commissioner, with the approval of the Secretary, is hereby authorized to make such regu- lations from time to time as may be necessary to give force and effect to this section and to safeguard the revenue. Tax ov Bstseagii 117 ^ Sec. 610. That natural wine within the meaning Wine» defined of this Act shall be deemed to be the product made from the normal alcohohc fermentation of the juice of sound, ripe grapes, without addition or abstrac- tion, except such as may occur in the usual cellar treatment or clarifying and aging; Provided, how- ever. That the product made from the juice of sound, ripe grapes by complete fermentation of the must under proper cellar treatment and corrected by the addition (under the supervision of a ganger or storekeeper-gauger in the capacity of ganger) of a solution of water and pure cane, beet, or dex- trose sugar (containing, respectively, not less than 95 per centum of actual sugar, calculated on a dry basis) to the must or to the wine, to correct nat- ural deficiencies, when such addition shall not in- crease the volume of the resultant product more than 35 per centum, and the resultant product does not contain less than five parts per thousand of acid before fermentation and not more than 13 per cen- timi of alcohol after complete fermentation, shall be deemed to be wine within the meaning of this Act, and may be labeled, transported, and sold as "wine," qualified by the name of the locality where produced, and may be further qualified by the name of its own particular type or variety : And provided further. That wine as defined in this section may be sweetened with cane sugar or beet sugar or pure condensed grape must and fortified under the pro- visions of this Act, and wines so sweetened or forti- fied shall be considered sweet wine within the mean- ing of this Act. Sec. 611. That upon all still wines, including ver- wbes, tax on muth, and all artificial or imitation wines or com- pounds sold as still wine, which are hereafter pro- duced in or imported into the United States, or which on the day after the passage of this Act are 118 RevevueAct on any winery premises or other bonded premises or in transit thereto or at any customhouse, there shall be levied, collected, and paid, in lieu of the internal-revenue taxes now imposed thereon by law, taxes at rates as follows, when sold, or removed for consumption or sale : ^ ^^*®* On wines containing not more than 14 per cen- tum of absolute alcohol, 16 cents per wine gallon, the per centum of alcohol taxable under this section to be reckoned by volume and not by weight ; On wines containing more than 14 per centum and not exceeding 21 per centimi of absolute alco- hol, 40 cents per wine gallon; On wines containing more than 21 per centum and not exceeding 24 per centum of absolute alco- hol, $1 per wine gallon; All such wines containing more than 24 per cen- tum of absolute alcohol by volume shall be classed as distilled spirits and shall pay tax accordingly. Grape brandy Sec. 612. That uudcr such regulations and offi- cial supervision and upon the giving of such notices, entries, bonds, and other security as the Commis- sioner, with the approval of the Secretary, may prescribe, any producer of wines defined under the provisions of this title, may withdraw from any fruit distillery or special bonded warehouse grape brandy, or wine spirits, for the fortification of such wines on the premises where actually made; Pro- vided, That there shall be levied and assessed against the producer of such wines a tax (in lieu of the internal-revenue tax now imposed thereon by law) of 60 cents per proof gallon of grape brandy or wine spirits whenever withdrawn and hereafter so used by him in the fortification of such wiiics dur- ing the preceding month, which assessment shall be paid by him within ten months from the date of no- tice thereof; Provided further, That nothing con- Tax ok Bevsraoes 119 tained in this section shall be construed as exempt- ing any wines, cordials, liqueurs, or similar com- pounds from the payment of any tax provided for in this title. Sec. 613. That upon the following articles which are hereafter produced in or imported into the United States, or which on the day after the pas- sage of this Act are on any winery premises or other bonded premises or in transit thereto or at any cus- tomhouse, there shall be levied, collected, and paid taxes at rates as follows, when sold, or removed for consumption or sale: On each bottle or other container of champagne Champagne or sparkling wine, 12 cents on each one-half pint or fraction thereof; On each bottle or other container of artificially Carbonated wine* carbonated wine, 6 cents on each one-half pint or fraction thereof ; On each bottle or other container of liqueurs, cor- Sweet wine dials, or similar compounds, by whatever name sold or offered for sale, containing sweet wine fortified with grape brandy, 6 cents on each one-half pint or fraction thereof. The tax imposed by this section shall, in the case of any article upon which a corresponding internal- revenue tax is now imposed by law, be in lieu of such tax. Sec. 614. That upon all articles specified in sec- Floor tai on wines tion 611 or 613 upon which the internal-revenue tax now imposed by law has been paid and whiv-h are on the day after the passage of this Act held by any person and intended for sale, there shall be levied, collected, and paid a floor tax equal to the diflPer- ence between the tax imposed by this Act and the tax so paid. Sec. 615. That upon all sweet wines held for sale Floor i«x on tweet by the producer thereof upon the day after the pas- ^"** 120 Reve N UE Act Method of payment of tax Act of October 1, 1890, amended sage of this Act there shall be levied, assessed, col- lected, and paid a floor tax equivalent to 30 cents per proof gallon upon the grape brandy or wine spirits used in the fortification of such wine. Sec. 616. That the taxes imposed by section 611 or 613 shall be paid by stamp on removal of the wines from the customhouse, winery, or other bonded place of storage for consumption or sale, and every person hereafter producing, or having in his possession or under his control when this title takes eflfect, any wines subject to the tax imposed in section 611 or 613 shall file such notice, describ- ing the premises on which such wines are produced or stored; shall execute a bond in such form; shall make such inventories under oath; and shall, prior to sale or removal for consumption, affix to each cask or vessel containing such wine such marks, labels, or stamps as the Commissioner, with the ap- proval of the Secretary, may from time to time pre- scribe; and the premises described in such notice shall, for the purpose of this Act, be regarded as bonded premises. But the provisions of this section, except as to payment of tax and the affixing of the required stamps or labels, shall not apply to wines held by retail dealers, as defined in section 3244 of the Revised Statutes, nor, subject to regulations prescribed by the Commissioner, with the approval of the Secretary, shall the tax imposed by section 611 apply to wines produced for the family use of the duly registered producer thereof and not sold or otherwise removed from the place of manufacture and not exceeding in any case two hundred gallons per year. Sec. 617. That sections 42, 43, and 45 of the Act entitled "An Act to reduce the revenue and equaUze duties on imports, and for other purposes," ap- proved October 1, 1890, as amended by section 68 Tax ok Bevebaoxs Ul of the Act entitled "An Act to reduce taxation, to provide revenue for the Government, and for other purposes," approved August 27, 1894, are further amended to read as follows : "Sec. 42. That any producer of pure sweet wines ReguUtiont for may use in the preparation of such sweet wines, un- production of sweet der such regulations and after the fiUng of such no- ^"* tices and bonds, together with the keeping of such records and the rendition of such reports as to ma- terials and products as the Commissioner of In- ternal Revenue, with the approval of the Secretary of the Treasury, may prescribe, wine spirits pro- duced by any duly authorized distiller, and the Com- missioner of Internal Revenue, in determining the Uability of any distiller of wine spirits to assess- ment under section 3309 of the Revised Statutes, is authorized to allow such distiller credit in his com- putations for the wine spirits withdrawn to be used in fortifying sweet wines under this Act. "Sec. 43. That the wine spirits mentioned in sec- Wme spirits defined tion 42 is the product resulting from the distillation of fermented grape juice, to which water may have been added prior to, during, or after fermentation, for the sole purpose of facilitating the fermentation and economical distillation thereof, and shall be held to include the product from grapes or their resi- dues commonly known as grape brandy, and shall include conmiercial grape brandy which may have been colored with burnt sugar or caramel; and the pure sweet wine which may be fortified with wine Pure sweet wine spirits under the provisions of this Act is fermented defined or partially fermented grape juice only, with the usual cellar treatment, and shall contain no other substance whatever introduced before, at the time of, or after fermentation, except as herein expressly provided; Provided, That the addition of pure boiled or condensed grape must or pure crystallized 122 Revekue Act cane or beet sugar, or pure dextrose sugar contain- ing, respectively, not less than 95 per centum of ac- tual sugar, calculated on a dry basis, or water, or any or all of them, to the pure grape juice before fermentation, or to the fermented product of such grape juice, or to both, prior to the fortification herein provided for, either for the purpose of per- fecting sweet wines according to commercial stand- ards or for mechanical purposes, shall not be ex- cluded by the definition of pure sweet wine afore- said; Provided, however. That the cane or beet su- gar, or pure dextrose sugar added for sweetening purposes shall not be in excess of 11 per centum of the weight of the wine to be fortified ; And provided further. That the addition of water herein author- ized shall be under such regulations as the Commis- sioner of Internal Revenue, with the approval of the Secretary of the Treasury, may from time to time prescribe; Provided, however. That records kept in accordance with such regulations as to the percentage of saccharine, acid, alcohohc, and added water content of the wine offered for fortification shall be open to inspection by any official of the De- partment of Agriculture thereto duly authorized by the Secretary of Agriculture; but in no case shall such wines to which water has been added be eligible for fortification under the provisions of this Act. where the same, after fermentation and before fortification, have an alcoholic strength of less than 5 per centum of their volume. Withdrawal of wine "Sec. 45. That uudcr such regulations and offi- spmts from bond ^j^j supcrvisiou, and upou the execution of such entries and the giving of such bonds, bills of lading, and other security as the Conmiissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, any producer of pure sweet wines as defined by this Act may withdraw Tax oir Bxvbkaosi ISS wine spirits from any special bonded warehouse in original packages or from any registered distillery in any quantity not less than eighty wine gallons, and may use so much of the same as may be required ^^^^^ j^ by him under such regulations, and after the filing fortification of such notices and bonds and the keeping of such records and the rendition of such reports as to ma- terials and products and the disposition of the same as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, in fortifying the pure sweet wines made by him, and for no other purpose, in accordance with the foregoing limitations and provisions; and the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, is author- ized whenever he shaU deem it to be necessary for the prevention of violations of this law to prescribe that wine spirits withdrawn under this section shall not be used to fortify wines except at a certain dis- tance prescribed by him from any distillery, recti- fying house, winery, or other establishment used for producing or storing distilled spirits, or for mak- ing or storing wines other than wines which are so fortified, and that in the building in which such for- tification of wines is practiced no wines or spirits other than those permitted by this regulation shall be stored in any room or part of the building in which fortification of wines is practiced. The use of wine spirits for the fortification of sweet wines under this Act shall be under the immediate super- vision of an officer of internal revenue, who shall make returns describing the kinds and quantities of wine so fortified, and shall affix such stamps and seals to the packages containing such wines as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and the Commissioner of Internal Reve- 124 REYsiirux Act Transfer of wines from one bonded warehouse to another or to a distillery Use of mne in pro- duction of non- beverage alcohol nue, with the approval of the Secretary of the Treasury, shall provide by regulations the time within which wines so fortified with the wine spirits so withdrawn may be subject to inspection, and for fijial accounting for the use of such wine spirits and for rewarehousing or for payment of the tax on any portion of such wine spirits which remain not used in fortifying pure sweet wines." Sec. 618. (a) That under such regulations and upon the execution of such notices, entries, bonds, and other security as the Commissioner, with the approval of the Secretary, may prescribe, domestic wines subject to the tax imposed by section 611 may be removed from the winery where produced, free of tax, for storage on other bonded premises or from such premises to other bonded premises (but not more than one such additional removal shall be allowed), or for exportation from the United States or for use as distilling material at any regularly registered distillery; Provided, however. That the distiller using any such wine as material shall, subject to the provisions of section 3309 of the Revised Statutes, as amended, be held to pay the tax on the product of such wines as will include both the alcohoUc strength therein produced by fer- mentation and that obtained from the brandy or wine spirits added to such wines at the time of for- tification. (b) Under regulations prescribed by the Commis- sioner with the approval of the Secretary, it shall be lawful to produce grape wines on bonded winery premises by the usual method, and to transport and use the same, and like wines heretofore produced and now stored on bonded winery premises, as dis- tiUing material for the production of nonbeverage spirits in the production of nonalcoholic wines, con- taining less than one-half of 1 per centum of alco- Tax ov BEVESAOEg 125 hol by volume, in any fruit brandy or industrial distillery; Provided, That all alcoholic spirits so obtained at any industrial distillery shall be de- natured, and all spirits so obtained at any fruit dis- tillery shall be removed and used only for nonbev- erage purposes or for denaturation. Sec. 619. That the collection of the tax on im- imported wines, ported still wines, including vermuth, and sparkhng collection of tax on wines, including champagne, and on imported ^liqueurs, cordials, and similar compounds, may be ■made within the discretion of the Commissioner, I with the approval of the Secretary, by assessment I instead of by stamps. I Sec. 620. That whoever evades or attempts to Penalties for evasion evade any tax imposed by sections 611 to 615, both ®^*" I inclusive, or any requirement of sections 610 to 621, both inclusive, or regulation issued pursuant thereto, or whoever, otherwise than as provided in such sections, recovers or attempts to recover any spirits from domestic or imported wine, or who- ever rectifies, mixes, or compounds with distilled spirits any domestic wines, other than in the manu- facture of liqueurs, cordials, or similar compounds, shall, on conviction, be punished for each such of- fense by a fine of not exceeding $5,000, or imprison- ment for not more than five years, or both, and in addition thereto by a penalty of double the tax evaded, or attempted to be evaded, to be assessed and collected in the same manner as taxes are as- sessed and collected, and all wines, spirits, liqueurs, cordials, or similar compounds as to which such violation occurs shall be forfeited to the United States. But the provisions of this section and the provisions of section 3244 of the Revised Statutes, as amended, relating to rectification, or other inter- nal-revenue laws of the United States, shall not be held to apply to or prohibit the mixing or blending 126 RxTEirnEAcT of wines subject to tax under the provisions of sec- tions 611 to 615, both inclusive, with each other or with other wines for the sole purpose of perfecting such wines according to commercial standards; Provided, That nothing herein contained shall be construed as prohibiting the use of tax-paid grain or other ethyl alcohol in the fortification of sweet wines as defined in section 610 of this Act and sec- tion 43 of the Act entitled "An Act to reduce the revenue and equalize duties on imports, and for other purposes," approved October 1, 1890, as amended by this Act. Apparatus for Sec. 621. That the Commissioner, by regulations protection of rercnue ^q \yQ approved by the Secretary, may require the use at each fruit distillery of such spirit meters, and such locks and seals to be affixed to f ermenters, tanks, or other vessels and to such pipe connections as may in his judgment be necessary or expedient, and is hereby authorized to assign to any such dis- tillery and to each winery where wines are to be fortified such number of gangers or storekeeper- gangers in the capacity of gangers as may be neces- sary for the proper supervision of the manufacture of brandy or the making or fortifying of wines sub- ject to tax imposed by this section; and the com- pensation of such officers shall not exceed $5 per diem while so assigned, together with their actual and necessary traveling expenses, and also a reason- able allowance for their board bills, to be fixed by the Comjnissioner, with the approval of the Secre- tary, but not to exceed $2.50 per diem for such board bills. Allowance for leakage Sec. 622. That the Commissioncr, with the ap- proval of the Secretary, is hereby authorized to make such allowances for unavoidable loss of wines while on storage or during cellar treatment as in his judgment may be just and proper. \ > TaxonBeteraoxs * 127 Sec. 623. That the second paragraph of section See. 3264 u. s. R. s. 3264 of the Revised Statutes, as amended by sec- »°>«°<*««* tion 5 of the Act of March 1, 1879, and as further amended by the Act of June 22, 1910, be amended so as to read as follows : "In all surveys forty-five gallons of mash or Surveyi beer brewed or fermented from grain shall repre- sent not less than one bushel of grain, and seven gal- lons of mash or beer brewed or fermented from mo- lasses shall represent not less than one gallon of molasses, except in distilleries operated on the sour- mash principle, in which distilleries sixty gallons of beer brewed or fermented from grain shall repre- sent not less than one bushel of grain, and except that in distilleries where the filtration-aeration pro- cess is used, with the approval of the Commissioner of Internal Revenue ; that is, where the mash after it leaves the mash tub is passed through a filtering machine before it is run into the fermenting tub, and only the filtered liquor passes into the ferment- ing tub, there shall hereafter be no limitation upon the number of gallons of water which may be used in the process of mashing or filtration for fermen- tation ; but the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, in order to protect the revenue, shall be authorized to prescribe by regulation, to be made by him, such character of survey as he may find suitable for dis- tilleries using such filtration-aeration process. The provisions hereof relating to filtration-aeration pro- cess shall apply only to sweet-mash distilleries." Sec. 624. That under such regulations as the withdrawal of aicohd Commissioner, with the approval of the Secretary, >«<* «p»"t« '<"• ««p»f* may prescribe, alcohol or other distilled spirits of a proof strength of not less than one hundred and eighty degrees intended for export free of tax may be drawn from receiving cisterns at any distillery, 128 Retsvue Act Sec. 3525 U. S. R. S. amended Brandy, regulations for manufacture or from storage tanks in any distillery warehouse, for transfer to tanks or tank ears for export from the United States, and all provisions of existing law relating to the exportation of distilled spirits not inconsistent herewith shall apply to spirits removed for export under the provisions of this Act. Sec. 625. That section 3255 of the Revised Statutes as amended by the Act of June 3, 1896, and as further amended by the Act of March 2, 1911, be further amended so as to read as follows: "Sec. 3255. The Commissioner of Internal Reve- nue, with the approval of the Secretary of the Treas- ury, may exempt distillers of brandy made exclus- ively from apples, peaches, grapes, pears, pine- apples, oranges, apricots, berries, plums, pawpaws, persimmons, prunes, figs, or cherries from any pro- vision of this title relating to the manufacture of spirits, except as to the tax thereon, when in his judgment it may seem expedient to do so; Pro- vided, That where, in the manufacture of wine, arti- ficial sweetening has been used the wine or the fruit pomace residuum may be used in the distillation of brandy, and such use shall not prevent the Com- missioner of Internal Revenue, with the approval of the Secretary of the Treasury, from exempting such distiller from any provision of this title relat- ing to the manufacture of spirits, except as to the tax thereon, when in his judgment it may seem ex- pedient to do so; And provided further. That the distillers mentioned in this section may add to not less than five hundred gallons (or ten barrels) of grape cheese not more than five hundred gallons of a sugar solution made from cane, beet, starch, or corn sugar, 95 per centum pure, such solution to have a saccharine strength of not to exceed 10 per centum, and may ferment the resultant mixture on Tax ok BxTEiiAasf 129 a winery or distillery premises, and such fermented product shall be regarded as distilling material." Sec. 626. That distilled spirits known commer- Gin for export eially as gin of not less than 80 per centum proof may at any time within eight years after entry in bond at any distillery be bottled in bond at such distillery for export without the payment of tax, under such rules and regulations as the Commis- sioner, with the approval of the Secretary, may pre- scribe. Sec. 627. That section 3354 of the Revised Sec. 3354 u. s. R. s. Statutes as amended by the Act approved June 18, amended 1890, be, and is hereby, amended to read as fol- lows : "Sec. 3354. Every person who withdraws any Penaliy for illegd fermented liquor from any hogshead, barrel, keg, withdrawal* of or other vessel upon which the proper stamp has fe^en**** '»<»"•' no* '.een affixed for the purpose of bottling the same, or who carries on or attempts to carry on the business of bottling fermented liquor in any brew- ery or other place in which fermented liquor is made, or upon any premises having communication with such brewery, or any warehouse, shall be liable to a fine of $500, and the property used in such bot- tling or business shall be liable to forfeiture; Pro- vided, however. That this section shall not be con- strued to prevent the withdrawal and transfer of unfermented, partially fermented, or fermented liquors from any of the vats in any brewery by way of a pipe line or other conduit to another building or place for the sole purpose of bottling the same, such pipe line or conduit to be constructed and operated in such manner and with such cisterns, vats, tanks, valves, cocks, faucets, and gauges, or other utensils or apparatus, either on the premises of the brewery or the bottling house, and with such changes of or additions thereto, and such locks, 180 Reyen ue Act Payment of tax Tax on near beer, 15 per cent seals, or other fastenings, and under such rules and regulations as shall be from time to time prescribed by the Commissioner of Internal Revenue, sub- ject to the approval of the Secretary of the Treas- ury, and all locks and seals prescribed shall be pro- vided by the Commissioner of Internal Revenue at the expense of the United States ; Provided further, That the tax imposed in section 3339 of the Revised Statutes shall be paid on all fermented liquor re- moved from a brewery to a bottling house by means of a pipe or conduit, at the time of such removal, by the cancellation and defacement, by the collector of the district or his deputy, in the presence of the brewer, of the number of stamps denoting the tax on the fermented liquor thus removed. The stamps thus cancelled and defaced shall be disposed of and accounted for in the manner directed by the Com- missioner of Internal Revenue, with the approval of the Secretary of the Treasury. And any viola- tion of the rules and regulations hereafter pre- scribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treas- ury, in pursuance of these provisions, shall be sub- ject to the penalties above provided by this section. Every owner, agent, or superintendent of any brew- ery or bottling house who removes, or connives at the removal of, any fermented liquor through a pipe line or conduit, without payment of the tax thereon, or who attempts in any manner to defraud the reve- nue as above, shall forfeit all the liquors made by and for him, and all the vessels, utensils, and ap- paratus used in making the same." Sec. 628. That there shall be levied, assessed, collected, and paid in lieu of the taxes imposed by sections 313 and 315 of the Revenue Act of 1917 — (a) Upon all beverages derived wholly or in part from cereals or substitutes therefor, and containing TAXOirBEVSRAOIf ISl less than one-half of one per centum of alcohol, sold by the manufacturer, producer, or importer, in bot- tles or other closed containers, a tax equivalent to 15 per centum of the price for which so sold; and upon all unfermented grape juice, ginger ale, root Tax on soft drink*, beer, sarsaparilla, pop, artificial mineral waters '^P^i'cent (carbonated or not carbonated), other carbonated waters or beverages, and other soft drinks, sold by the manufacturer, producer, or importer, in bottles or other closed containers, a tax equivalent to 10 per centimi of the price for which so sold ; and (b) Upon all natural mineral waters or table Tax on natural waters, sold by the producer, bottler, or importer °""^" ^**" thereof, in bottles or other closed containers, at over 10 cents per gallon, a tax of 2 cents per gallon. Sec. 629. That each manufacturer, producer. Returns bottler, or importer of any of the articles enumer- ated in section 628 shall make monthly returns un- der oath in duplicate and pay the taxes imposed in respect to such articles by such section to the col- lector for the district in which is located the prin- cipal place of business, containing such information necessary for the assessment of the tax, and at such times and in such manner as the Conmaissioner, with the approval of the Secretary, may by regu- lation prescribe. The tax shall, without assessment by the Com- P«y»«nt missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of S per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Sec. 630. That on and after May 1, 1919, there Tax on ice cream shall be levied, assessed, collected, and paid a tax *"**»****• of 1 cent for each 10 cents or fraction thereof of the 1** RxTxvns Act amount paid to any person conducting a soda foun- tain, ice-cream parlor, or other similar place of busi- ness, for drinks commonly known as soft drinks, compounded or mixed at such place of business, or for ice cream, ice-cream sodas, sundaes, or other similar articles of food or drink, when any of the above are sold on or after such date for consump- tion in or in proximity to such place of business. Such tax shall be paid by the piu'chaser to the ven- dor at the time of the sale and shall be collected, re- turned, and paid to the United States by such ven- dor in the same manner as provided in section 502. TITLE VII. Tax on Cigars, Tobacco, and Manufac- tures Thereof Sec. 700. (a) That upon cigars and cigarettes Taxei on dgw and manufactured in or imported into the United cigarettet States, and hereafter sold by the manufacturer or importer, or removed for consumption or sale, there shall be levied, collected, and paid under the pro- visions of existing law, in heu of the internal-reve- nue taxes now imposed thereon by law, the follow- ing taxes, to be paid by the manufacturer or im- porter thereof — On cigars of all descriptions made of tobacco, or Ggars weighing not any substitute therefor, and weighing not more than «▼«' 3 ibt. per m three pounds per thousand, $1.50 per thousand; On cigars made of tobacco, or any substitute Ggar« weighing oyer therefor, and weighing more than three pounds per ^ lbs. per M thousand, if manufactured or imported to retail at not more than 5 cents each, $4 per thousand; If manufactured or imported to retail at more than 5 cents each and not more than 8 cents each, $6 per thousand; If manufactured or imported to retail at more than 8 cents each and not more than 15 cents each, $9 per thousand; If manufactured or imported to retail at more than 15 cents each and not more than 20 cents each, $12 per thousand; If manufactiu'cd or imported to retail at more than 20 cents each, $15 per thousand; 133 184 Revekue Act Cigarettes weiglung not over 3 lbs. per M Over 3 lbs. per M Retul price defined Labels on containers Ggarette packages, regulaUons goyerning On cigarettes made of tobacco, or any substitute therefor, and weighing not more than three pounds per thousand, $3 per thousand; Weighing more than three pounds per thousand, $7.20 per thousand. (b) Whenever in this section reference is made to cigars manufactured or imported to retail at not over a certain price each, then in determining the tax to be paid regard shall be had to the ordinary retail price of a single cigar. (c) The Commissioner may, by regulation, re- quire the manufacturer or importer to affix to each box, package, or container a conspicuous label in- dicating the clause of this section under which the cigars therein contained have been tax-paid, which must correspond with the tax- paid stamp on such box or container. (d) Every manufacturer of cigarettes (includ- ing small cigars weighing not more than three pounds per thousand) shall put up all the cigarettes and such small cigars that he manufactures or has manufactured for him, and sells or removes for con- sumption or sale, in packages or parcels containing five, eight, ten, twelve, fifteen, sixteen, twenty, twenty-four, forty, fifty, eighty, or one hundred cigarettes each, and shall securely affix to each of such packages or parcels a suitable stamp denoting the tax thereon and shall properly cancel the same prior to such sale or removal for consumption or sale under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe; and all cigarettes imported from a foreign country shall be packed, stamped, and the stamps cancelled in a like manner, in addition to the import stamp indicating inspection of the customhouse before they are withdrawn therefrom. CioABB AND Tobacco 135 Sec. 701. (a) That upon all tobacco and snuflf Tobacco and muff, manufactured in or imported into the United *"•" States, and hereafter sold by the manufacturer or importer, or removed for consumption or sale, there shall be levied, collected, and paid, in lieu of the internal-revenue taxes now imposed thereon by law, a tax of 18 cents per pound, to be paid by the manufacturer or importer thereof. (b) Section 3362 of the Revised Statutes, as amended, is hereby amended to read as follows: "Sec. 3362. All manufactured tobacco shall be Sec. 3362 u. s. R. s. put up and prepared by the manufacturer for sale, «°»«n<*e<' or removal for sale or consimaption, in packages of the following description and in no other manner: "All smoking tobacco, Snuif, fine-cut chewing to- Tobacco packages, bacco, all cut and granulated tobacco, aU shorts, the '^^^^^^^^^^ ««^*™^"« refuse of fine-cut chewing, which has passed through a riddle of thirty-six meshes to the square inch, and all refuse scraps, cUppings, cuttings, and sweepings of tobacco, and all other kinds of tobacco not other- wise provided for, in packages containing one- eighth of an ounce, three-eighths of an ounce, and further packages with a difference between each package and the one next smaller of one-eighth of an ounce up to and including two ounces, and fur- ther packages with a difference between each pack- age and the one next smaller of one-fourth of an ounce up to and including four ounces, and pack- ages of five ounces, six ounces, seven ounces, eight ounces, ten ounces, twelve ounces, fourteen ounces, and sixteen ounces; Provided, That snuff may, at the option of the manufacturer, be put up in blad- ders and in jars containing not exceeding twenty pounds. "All cavendish, plug, and twist tobacco, in wooden packages not exceeding two himdred pounds net weight. 136 RxYEKUB Act Information on packages Export packages excepted Sales in bulk without tax Materials used in making containers Floor tax on products held for sale Ggarette paper, tax on "And every such wooden package shall have printed or marked thereon the manufacturer's name and place of manufacture, the registered number of the manufactory, and the gross weight, the tare, and the net weight of the tobacco in each package; Provided, That these limitations and descriptions of packages shall not apply to tobacco and snuff transported in bond for exportation and actually exported; And provided further, That perique to- bacco, snuff flour, fine-cut shorts, the refuse of fine- cut chewing tobacco, refuse scraps, chppings, cut- tings, and sweepings of tobacco, may be sold in bulk as material, and without the payment of tax, by one manufacturer directly to another manufacturer, or for export, under such restrictions, rules, and regu- lations as the Commissioner of Internal Revenue may prescribe; And provided further. That wood, metal, paper, or other materials may be used sepa- rately or in combination for packing tobacco, snuff, and cigars, under such regulations as the Commis- sioner of Internal Revenue may estabhsh." Sec. 702. That upon all the articles enumer- ated in section 700 or 701, which were manufactured or imported, and removed from factory or custom- house on or prior to the date of the passage of this Act, and upon which the tax imposed by existing law has been paid, and which are, on the day after the passage of this Act, held by any person and in- tended for sale, there shall be levied, assessed, col- lected, and paid a floor tax equal to the difference between (a) the tax imposed by this Act upon such articles according to the class in which they are placed by this title, and (b) the tax imposed upon such articles by existing law other than section 403 of the Revenue Act of 1917. Sec. 703. That there shall be levied, collected, and paid, in Ueu of the taxes imposed by section 404 CZOABB AlTD TOBACOO 137 of the Revenue Act of 1917, upon cigarette paper made up into packages, books, sets, or tubes, made up in or imported into the United States and here- after sold by the manufacturer or importer to any person (other than to a manufacturer of cigarettes for use by him in the manufacture of cigarettes) the following taxes, to be paid by the manufacturer or importer: On each package, book, or set, con- taining more than twenty-five but not more than fifty papers, one-half cent; containing more than fifty but not more than one hundred papers, 1 cent ; containing more than one hundred papers, one-half cent for each fifty papers or fractional part thereof; and upon tubes, 1 cent for each fifty tubes or frac- tional part thereof. Every manufacturer of cigarettes purchasing any Records and bond cigarette paper made up into tubes (a) shall give required of dgareito bond in an amount and with sureties satisfactory °'*° ^^^^ to the Commissioner that he will use such tubes in the manufacture of cigarettes or pay thereon a tax equivalent to the tax imposed by this section, and (b) shall keep such records and render under oath such returns as the Commissioner finds necessary to show the disposition of all tubes purchased or imported by such manufacturer of cigarettes. Sec. 704. That section 35 of the Act entitled Sec. 35, Aci of Aug. 5, "An Act to provide revenue, equalize duties and en- ^^^* repealed courage the industries of the United States, and for other purposes," approved August 5, 1909, be, and is hereby, repealed, to take effect April 1, 1919. That section 3360 of the Revised Statutes be, and See. 3360, u. s. R. s. is hereby, amended to read as follows : amended "Sec. 3360. (a) Every dealer in leaf tobacco Statement of dealers shall file with the collector of the district in which "> *«•' tobacco his business is carried on, a statement in duphcate, subscribed under oath, setting forth the place, and, if in a city, the street and number of the? street, 188 Reyekus Act Bond Number Inventory report Records where his business is to be carried on, and the exact location of each place where leaf tobacco is held by him on storage, and, whenever he adds to or discon- tinues any of his leaf tobacco storage places, he shall give immediate notice to the collector of the district in which he is registered. "Every such dealer shall give a bond with surety, satisfactory to, and to be approved by, the collector of the district, in such penal sum as the collector may require, not less than $500; and a new bond may be required in the discretion of the collector or under instructions of the Commissioner. "Every such dealer shall be assigned a nimiber by the collector of the district, which number shall ap- pear in every inventory, invoice and report ren- dered by the dealer, who shall also obtain certifi- cates from the collector of the district setting forth the place where his business is carried on and the places designated by the dealer as the places of storage of his tobacco, which certificates shall be posted conspicuously within the dealer's registered place of business, and within each designated place of storage. "(b) Every dealer in leaf tobacco shall make and deUver to the collector of the district a true inven- tory of the quantity of the different kinds of to- bacco held or owned, and where stored by him, on the first day of January of each year, or at the time of commencing and at the time of concluding busi- ness, if before or after the first day of January, such inventory to be made under oath and rendered in such form as may be prescribed by the Commis- sioner. "Every dealer in leaf tobacco shall render such invoices and keep such records as shall be prescribed by the Commissioner, and shall enter therein, day by day, and upon the same day on which the cir- CzoABs AND Tobacco 1S9 cumstance, thing or act to be recorded is done or occurs, an accurate account of the number of hogs- heads, tierces, cases and bales, and quantity of leaf tobacco contained therein, purchased or received by him, on assignment, consignment, for storage, by transfer or otherwise, and of whom purchased or received, and the number of hogsheads, tierces, cases and bales, and the quantity of leaf tobacco contained therein, sold by him, with the name and residence in each instance of the person to whom sold, and if shipped, to whom shipped, and to what district; such records shall be kept at his place of business at all times and preserved for a period of two years, and the same shall be open at all hours for the inspection of any internal-revenue officer or agent. "Every dealer in leaf tobacco on or before the MontHy reports tenth day of each month, shall furnish to the col- lector of the district a true and complete report of all purchases, receipts, sales and shipments of leaf tobacco made by him during the month next pre- ceding, which report shall be verified and rendered in such form as the Commissioner, with the ap- proval of the Secretary, shall prescribe. "(c) Sales or shipments of leaf tobacco by a Sales or shipments, dealer in leaf tobacco shall be in quantities of not regulations concerning less than a hogshead, tierce, case, or bale, except loose leaf tobacco comprising the breaks on ware- house floors, and except to a duly registered manu- facturer of cigars for use in his own manufactory exclusively. "Dealers in leaf tobacco shall make shipments of leaf tobacco only to other dealers in leaf tobacco, to registered manufacturers of tobacco, snuff, ci- gars or cigarettes, or for export. "(d) Upon all leaf tobacco sold, removed or Penai tax for violation shipped by any dealer in leaf tobacco in violation of of above requirements 140 Rbtxitus Act Penalties Farmer not a "dealer'' (< (( the provisions of subdivision (c), or in respect to vi^hich no report has been made by such dealer in accordance with the provisions of subdivision (b), there shall be levied, assessed, collected and paid a tax equal to the tax then in force upon manufac- tured tobacco, such tax to be assessed and collected in the same manner as the tax on manufactured tobacco. (e) Every dealer in leaf tobacco (1) who neglects or refuses to furnish the state- ment, to give bond, to keep books, to file inventory or to render the invoices, returns or reports required by the Commissioner, or to notify the collector of the district of additions to his places of storage ; or " (2) who ships or delivers leaf tobacco, except as herein provided; or "(3) who fraudulently omits to account for to- bacco purchased, received, sold, or shipped; shall be fined not less than $100 or more than $500, or imprisoned not more than one year, or both. "(f) For the purposes of this section a farmer or grower of tobacco shall not be regarded as a dealer in leaf tobacco in respect to the leaf tobacco pro- duced by him." TITLE VIII. Tax On Admissions and Dues Sec. 800. (a) That from and after April 1, Admissions tax 1919, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 700 of the Revenue Act of 1917 — (1) A tax of 1 cent for each 10 cents or fraction R^e thereof of the amount paid for admission to any place on or after such date, including admission by season ticket or subscription, to be paid by the per- son paying for such admission; (2) In the case of persons (except bona fide em- ployees, municipal officers on official business, per- sons in the mihtary or naval forces of the United States when in uniform, and children under twelve years of age) admitted free or at reduced rates to Free or reduced rate any place at a time when and under circumstances *<*°"»«»»n« under which an admission charge is made to other persons, a tax of 1 cent for each 10 cents or frac- tion thereof of the price so charged to such other persons for the same or similar accommodations, to be paid by the person so admitted; (8) Upon tickets or cards of admission to the- Tickets sold ai ad- aters, operas, and other places of amusement, sold ^^we iHmVi ticket at news stands, hotels, and places other than the office ticket offices of such theaters, operas, or other places of amusement, at not to exceed 50 cents in excess of the simi of the established price therefor at such ticket offices plus the amount of any tax imposed under paragraph (1), a tax equivalent to 5 per centum of the amount of such excess; and if sold 141 148 Retknux Act Hckets sold at adyanced prices by employees Permanent use of boxes or seats Cabarets, roof- gardens, etc. for more than 50 cents in excess of the sum of such established price plus the amount of any tax im- posed under paragraph (1), a tax equivalent to 50 per centimi of the whole amount of such excess, such taxes to be returned and paid, in the manner provided in section 903, by the person selling such tickets ; (4) A tax equivalent to 50 per centum of the amount for which the proprietors, managers, or em- ployees of any opera house, theater, or other place of amusement sell or dispose of tickets or cards of admission in excess of the regular or established price or charge therefor, such tax to be returned and paid, in the manner provided in section 903, by the person selling such tickets; (5) In the case of persons having the perma- nent use of boxes or seats in an opera house or any place of amusement or a lease for the use of such box or seat in such opera house or place of amuse- ment (in lieu of the tax imposed by paragraph ( 1 ) ) , a tax equivalent to 10 per centum of the amount for which a similar box or seat is sold for each per- formance or exhibition at which the box or seat is used or reserved by or for the lessee or holder, such tax to be paid by the lessee or holder; and (6) A tax of 1% cents for each 10 cents or frac- tion thereof of the amount paid for admission to any public performance for profit at any roof garden, cabaret, or other similar entertainment, to which the charge for admission is wholly or in part in- cluded in the price paid for refreshment, service, or merchandise; the amount paid for such admis- sion to be deemed to be 20 per centum of the amoimt paid for refreshment, service, and merchandise; such tax to be paid by the person paying for such refreshment, service, or merchandise. Tax on Admissions akd Duks 14S (b) No tax shall be levied under this title in re- Exemptions spect to any admissions all the proceeds of which inure exclusively to the benefit of religious, educa- tional, or charitable institutions, societies, or organ- izations, societies for the prevention of cruelty to children or animals, or exclusively to the benefit of organizations conducted for the sole purpose of maintaining symphony orchestras and receiving substantial support from voluntary contributions, none of the profits of which are distributed to mem- bers of such organizations, or exclusively to the benefit of persons in the military or naval forces of the United States, or admissions to agricultural fairs none of the profits of which are distributed to stockholders or members of the association conduct- ing the same. (c) The term '^admission" as used in this title in- Admission eludes seats and tables, reserved or otherwise, and defined other similar acconmiodations, and the charges made therefor. (d) The price (exclusive of the tax to be paid by information to be the person paying for admission) at which every printed on ticket admission ticket or card is sold shall be conspicu- ously and indelibly printed, stamped, or written on the face or back thereof, together with the name of the vendor if sold other than at the ticket office of the theater, opera, or other place of amusement. Whoever sells an admission ticket or card on which the name of the vendor and price is not so printed, stamped, or written, or at a price in excess of the price so printed, stamped, or written thereon, is guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100. Sec. 801. That from and after April 1, 1919, Dues and member, there shall be levied, assessed, collected, and paid, in »*"p '««» *" lieu of the taxes imposed by section 701 of the Reve- nue Act of 1917, a tax equivalent to 10 per centum 144 Retexux Act Inidadon fee« Exempdons Life memberships CoQection and payment of taxes See page 103 of any amount paid on or after such date, for any period after such date, (a) as dues or membership fees (where the dues or fees of an active resident annual member are in excess of $10 per year) to any social, athletic, or sporting club or organization; or (b) as initiation fees to such a club or organiza- tion, if such fees amount to more than $10, or if the dues or membership fees (not including initiation fees) of an active resident annual member are in excess of $10 per year; such taxes to be paid by the persons paying such dues or fees; Provided, That there shall be exempted from the provisions of this section all amounts paid as dues or fees to a fra- ternal society, order, or association, operating un- der the lodge system. In the case of life member- ships a life member shall pay annually, at the time for the payment of dues by active resident annual members, a tax equivaleiii, to the tax upon the amount paid by such a member, but shall pay no tax upon the amount paid for life membership. Sec. 602, That every person (a) receiving any payments for such admission, dues, or fees shall col- lect the amount of the tax imposed by section 800 or 801 from the person making such payments, or (b) admitting any person free to any place for ad- mission to which a charge is made, shall collect the amount of the tax imposed by section 800 from the person so admitted. Every club or organization having Ufe members, shall collect from such mem- bers the amount of the tax imposed by section 801. In all the above cases returns and payments of the amount so collected shall be made at the same time and in the same manner as provided in section 502. manu- TITLE IX. Excise Taxes Sec. 900. That there shall be levied, assessed, Excise taxes collected, and paid upon the following articles sold or leased by the manufacturer, producer, or im- On sales b porter, a tax equivalent to the following percentages faciurer or importer of the price for which so sold or leased — (1) Automobile trucks and automobile wagons. Autotrucks (including tires, inner tubes, parts, and accessories and accessories therefor, sold on or in connection therewith or with the sale thereof) , 3 per centum; (2) Other automobiles and motorcycles, (includ- Autos and motor- ing tires, inner tubes, parts, and accessories there- ^^^^* *"** accessories for, sold on or in connection therewith or with the sale thereof), except tractors, 5 per centum; (3) Tires, inner tubes, parts, or accessories, for Accessories any of the articles enumerated In subdivision (1), or (2), sold to any person other than a manufac- turer or producer of any of the articles enumerated in subdivision (1), or (2), 5 per centum; (4) Pianos, organs (other than pipe organs). Musical instruments piano players, graphophones, phonographs, talking machines, music boxes, and records used in connec- tion with any musical instrument, piano player, graphophone, phonogi^aph, or talking machine, 5 per centum; ( 5 ) Tennis rackets, nets, racket covers and presses. Sporting goods skates, snowshoes, skis, toboggans, canoe paddles and cushions, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, football hel- mets, harness and goals, basket-ball goals and uni- 145 146 Re VEKUK Act Chewing gum Cameras Photo films Candy Hrearms and ammunition Hunting knives, daggers, etc. Electric fans Thermos bottles Vipes and cigarette holders Slot maclunes forms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games (except playing cards and children's toys and games), and all similar articles commonly or com- mercially known as sporting goods, 10 per centimi; (6) Chewing gum or substitutes therefor, 3 per centum ; (7) Cameras, weighing not more than 100 pounds, 10 per centum; (8) Photographic films and plates, other than moving-picture films, 5 per centum; (9) Candy, 5 per centum; (10) Firearms, shells, and cartridges, except those sold for the use of the United States, any State, Territory, or possession of the United States, any political subdivision thereof, the District of Columbia, or any foreign country while engaged against the German Government in the present war, 10 per centum; (11) Hunting and bowie knives, 10 per centum; (12) Dirk knives, daggers, sword canes, stillet- tos, and brass or metallic knuckles, 100 per centum; (13) Portable electric fan, 5 per centum; (14) Thermos and thermostatic bottles, carafes, jugs, or other thermostatic containers, 5 per cen- tum; (15) Cigar or cigarette holders and pipes, com- posed wholly or in part of meerschaum or amber, humidors, and smoking stands, 10 per centum; (16) Automatic slot-device vending machines, 5 per centum, and automatic slot-device weighing ma- chines, 10 per centum; if the manufacturer, pro- ducer, or importer of any such machine operates it for profit, he shall pay a tax in respect to each such leasure boats, etc Excise Taxbi 147 machine put into operation equivalent to 5 per cen- tum of its fair market value in the case of a vending machine, and 10 per centum of its fair market value in the case of a weighing machine ; (17) Liveries and livery boots and hats, 10 per ^1^,^^^, centum; (18) Hunting and shooting garments and rid- Sporting habit* ing habits, 10 per centum; • (19) Articles made of fur on the hide or pelt, or Fur product* of which any such fur is the component material of chief value, 10 per centum; (20) Yachts and motor boats not designed for ]'^fl'_'*'f^'* trade, fishing, or national defense; and pleasure boats and pleasure canoes if sold for more than $15, 10 per centum; (21) Toilet soaps and toilet soap powders, 3 per centum. If any manufacturer, producer, or importer of Toilet soaps any of the articles enumerated in this section cus- tomarily seUs such articles both at wholesale and at J[t?h who^^^^^^^^ retail, the tax in the case of any article sold by him a„d retail at retail shall be computed on the price for which like articles are sold by him at wholesale. The taxes imposed by this section shall, in the case of any article in respect to which a correspond- ing tax is imposed by section 600 of the Revenue Act of 1917, be in lieu of such tax. Sec. 901. That if any person manufactures, pro- saies, leases or duces or imports any article enumerated in section licenses taxed on 900, or leases or licenses for exhibition any positive ****" ®' ^^^ '°*'*'®' motion-picture film containing a picture ready for **"^* projection, and, whether through any agreement, arrangement, or understanding, or otherwise, sells, leases or licenses such article at less than the fair market price obtainable therefor, either (a) in such manner as directly or indirectly to benefit such per- 148 RxvEifrnK Act Works of art and antiques Exception Monthly returns Collection and pay- ment of tax Luxury taxes on goods sold by dealers for consumption son or any person directly or indirectly interested in the business of such person, or (b) with intent to cause such benefit, the amount for which such arti- cle is sold, leased or licensed shall be taken to be the amount which would have been received from the sale, lease or Ucense of such article if sold, leased or licensed at the fair market price. Sec. 902. That there shall be levied, assessed, collected, and paid upon sculpture, paintings, stat- uary, art porcelains, and bronzes, sold by any person other than the artist, a tax equivalent to 10 per centum of the price for which so sold. This section shall not apply to the sale of any such article to an educational institution or pubUc art museum. Sec. 903. That every person Uable for any tax imposed by section 900, 902, or 906, shall make monthly returns under oath in duplicate and pay the taxes imposed by such sections to the collector for the district in which is located the principal place of business. Such returns shall contain such infor- mation and be made at such times and in such man- ner as the Commissioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Com- missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Sec. 904. (a) That on and after May 1, 1919, there shall be levied, assessed, collected, and paid a tax equivalent to 10 per centum of so much of the amount paid for any of the following articles as is in excess of the price hereinafter specified as to each such article, when such article is sold by or Exciss Taxes 1^ for a dealer or his estate on or after such date for consumption or use — ( 1 ) Carpets and rugs, including fiber, except im- Carpcu and rugs ported and American rugs made principally of wool, on the amount in excess of $5 per square yard ; (2) Picture frames, on the amount in excess of Frames $10 each; (3) Trunks, on the amount in excess of $50 each; Trunks (4) Valises, traveling bags, suit cases, hat boxes Valises, etc used by travelers, and fitted toilet cases, on the amount in excess of $25 each; (5) Purses, pocketbooks, shopping and hand ""®*'***^- bags, on the amount in excess of $7.50 each; (6) Portable lighting fixtures, including lamps of Ughting fixtures all kinds and lamp shades, on the amount in excess of $25 each; (7) Umbrellas, parasols, and sun shades, on the Umbrellas, etc amount in excess of $4 each; k(8) Fans, on the amount in excess of $1 each; Fans (9) House or smoking coats or jackets, and bath House coats, etc or lounging robes, on the amount in excess of $7.50 each; (10) Men's waistcoats, sold separately from suits, Waistcoats on the amount in excess of $5 each ; K (11) Women's and misses' hats, bonnets, and Women's hats Tioods, on the amount in excess of $15 each; (12) Men's and boys' hats, on the amount in ex- Men's hats cess of $5 each; (13) Men's and boys' caps, on the amount in ex- Men's caps cess of $2 each; (14) Men's, women's, misses', and boys' boots, Boots and shoes shoes, pumps, and sUppers, not including shoes or appliances made to order for any person having a crippled or deformed foot or ankle, on the amount in excess of $10 per pair; (15) Men's and boys' neckties and neckwear, on Men's neckwear the amount in excess of $2 each; 100 Rsysirux Act Men's hose Women's hose Men's shirts Underclothing, etc Kimonos, etc. Exceptions: Articles taxed as jewelry Articles taxed as f ur liveries and sporting habits Taxes to bo paid by pwchaser Returns See page 103 Jewelry sold by dealers, tax on (16) Men's and boys' silk stockings or hose, on the amount in excess of $1 per pair ; (17) Women's and misses' silk stockings or hose, on the amount in excess of $2 per pair; (18) Men's shirts, on the amount in excess of $3 each; (19) Men's, women's, misses', and boys' pajamas, night gowns, and underwear, on the amount in ex- cess of $5 each; and (20) Kimonos, petticoats, and waists, on the amount in excess of $15 each. (b) The tax imposed by this section shall not ap- ply (1) to any article enumerated in paragraphs (2) to (8), both inclusive, of subdivision (a), if such article is made of or ornamented, mounted, or fitted with, precious metals or imitations thereof or ivory, or (2) to any article made of fur on the hide or pelt, or of which any such fur is the component material of chief value, or to (3) any article enumer- ated in subdivision (17) or (18) of section 900. (c) The taxes imposed by this section shall be paid by the purchaser to the vendor at the time of the sale and shall be collected, returned, and paid to the United States by such vendor in the same manner as provided in section 502. Sec. 905. That on and after April 1, 1919, there shall be levied, assessed, collected, and paid (in lieu of the tax imposed by subdivision (e) of section 600 of the Revenue Act of 1917) upon all articles conmionly or conmiercially known as jewelry, whether real or imitation ; pearls, precious and semi-precious stones, and imitations thereof ; articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical instruments); watches; clocks; opera glasses; lorgnettes; marine glasses; field glasses ; and binoculars ; upon any of the above when ExciseTaxes 151 sold by or for a dealer or his estate for consumption or use, a tax equivalent to 5 per centum of the price Rue for which so sold. Every person selling any of the articles enumer- Returns ated in this section shall make returns under oath in duphcate (monthly or quarterly as the Commis- sioner, with the approval of the Secretary, may pre- scribe) and pay the taxes imposed in respect to such articles by this section to the collector for the dis- trict in which is located the principal place of busi- ness. Such returns shall contain such information and be made at such times and in such manner as the Commissioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Commis- Collection and sioner or notice from the collector, be due and pay- payment able to the collector at the time so fixed for fihng the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 Pentity per centum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Sec. 906. That on and after the 1st day of May, leatiag motion picture 1919, any person engaged in the business of leasing fiin»,t«xon or Ucensing for exhibition positive motion-picture films containing pictures ready for projection shall pay monthly an excise tax in respect to carrying on such business equal to 5 per centum of the total ren- tals earned from each such lease or license during the preceding month. If a person owning such a film exhibits it for profit he shall pay a tax equiva- lent to 5 per centum of the fair rental or Ucense value of such film at the time and place where and for the period during which exhibited. If any such person has, prior to December 6, 1918, made a bona fide contract with any person for the lease or licen- sing, after the tax imposed by this section takes 102 Revexuk Act Toilet and medicinal preparations sold by dealers, tax on Rate Perfumes and cosmetics Patent and proprie- tary medicines effect, of such a film for exhibition for profit, and if such contract does not permit the adding of the whole of the tax imposed by this section to the amount to be paid under such contract, then the les- see or Hcensee shall, in lieu of the lessor or licensor, pay so much of such tax as is not so permitted to be added to the contract price. The tax imposed by this section shall be in heu of the tax imposed by subdivisions (c) and (d) of section 600 of the Reve- nue Act of 1917. Sec. 907. (a) That on and after May 1, 1919, there shall be levied, assessed, collected and paid (in lieu of the taxes imposed by subdivisions (g) and (h) of section 600 of the Revenue Act of 1917) a tax of 1 cent for each 25 cents or fraction thereof of the amount paid for any of the following articles when sold by or for a dealer or his estate on or after such date for consumption or use: (1) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, tooth and mouth washes, dentifrices, tooth pastes, aromatic cachous, toilet powders (other than soap powders), or any similar substance, article, or preparation by whatsoever name known or distinguished, any of the above which are used or apphed or intended to be used or applied for toilet purposes; (2) Pills, tablets, powders, tinctures, troches or lozenges, sirups, medicinal cordials or bitters, ano- dynes, tonics, plasters, liniments, salves, ointments, pastes, drops, waters (except those taxed under sec- tion 628 of this Act) , essences, spirits, oils, and other medicinal preparations, compounds, or composi- tions (not including serums and antitoxins), upon the amount paid for any of the above as to which the manufacturer or producer claims to have any private formula, secret, or occult art for making or Excise Taxes lOS ions preparing the same, or has or claims to have any exclusive right or title to the making or preparing the same, or which are prepared, uttered, vended, or exposed for sale under any letters patent, or trade-mark, or which (if prepared by any formula, published or unpublished) are held out or recom- mended to the public by the makers, vendors, or proprietors thereof as proprietary medicines or me- dicinal proprietary articles or preparations, or as remedies or specifics for any disease, diseases, or affection whatever affecting the human or animal body ; Provided, That the provisions of this section Exceptii shall not apply to the sale of vaccines and bacter- ines which are not advertised to the general lay pub- lic, nor to the sale by a physician in personal at- tendance upon a patient of medicinal preparations not so advertised. (b) The taxes imposed by this section shall be col- Method of coUecti lected by whichever of the following methods the I Commissioner may deem expedient : ( 1 ) by stamp (i) Stamps afBxed to such article by the vendor, the cost of which shall be reimbursed to the vendor by the pur- [ chaser; or (2 ) by payment to the vendor by the pur- (2) Payment to chaser at the time of the sale, the taxes so collected ^«n<*«' being returned and paid to the United States by such vendor in the same manner as provided in sec- See page 103 tion 502. ion TITLE X. Special Taxes Capital stock tax, effective date For agn corporations Sec. 1000. (a) That on and after July 1, 1918, in lieu of the tax imposed by the first subdivision of section 407 of the Revenue Act of 1916 — (1) Every domestic corporation shall pay an- nually a special excise tax with respect to carrying Domestic rorporations ou OT doiug busiucss, equivalent to $1 for each $1,000 of so much of the fair average value of its capital stock for the preceding year ending June thirtieth as is in excess of $5,000. In estimating the value of capital stock the surplus and undivided profits shall be included; (2) Every foreign corporation shall pay an- nually a special excise tax with respect to carrying on or doing business in the United States, equiva- lent to $1 for each $1,000 of the average amount of capital employed in the transaction of its business in the United States during the preceding year end- ing June thirtieth. (b) In computing the tax in the case of insurance companies such deposits and reserve funds as they are required by law or contract to maintain or hold for the protection of or payment to or apportion- ment among poUcyholders shall not be included. (c) The taxes imposed by this section shall not apply in any year to any corporation which was not engaged in business (or in the case of a foreign cor- poration not engaged in business in the United States) during the preceding year ending June 30, nor to any corporation enumerated in section 231. Insurance companies' reserves Exenq)tions See page 44 164 SrsoiAL Taxxs li$ The taxes imposed by this section shall apply to Mutual. insurance mutual insurance companies, and in the case of companies, tax on every such domestic company the tax shall be equivalent to $1 for each $1,000 of the excess over $5,000 of the sum of its sm'plus or contingent re- serves maintained for the general use of the business and any reserves the net additions to which are in- cluded in net income under the provisions of Title II, as of the close of the preceding accounting pe- riod used by such company for purposes of making its income tax return; Provided, That in the case of a foreign mutual insurance company the tax shall Foreign mutual be equivalent to $1 for each $1,000 of the same pro- ^"""'" """'**""• portion of the sum of such surplus and reserves, which the reserve fund upon business transacted within the United States is of the total reserve upon all business transacted, as of the close of the preced- ing accounting period used by such company for purposes of making its income tax return. (d) Section 257 shall apply to all returns filed Returns, see payees with the Commissioner for purposes of the tax im- posed by this section. Sec. 1001. That on and after January 1, 1919, Spedai occupational there shall be levied, collected, and paid annually *""' *^^'*^^* ^^^ the following special taxes — ( 1 ) Brokers shall pay $50. Every person whose Brokers business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, other securities, pro- duce or merchandise, for others, shall be regarded as a broker. If a broker is a member of a stock exchange, or if he is a member of any produce ex- change, board of trade, or similar organization, where produce or merchandise is sold, he shall pay an additional amount as follows: If the average value, during the preceding year ending June 30, of a seat or membership in such exchange or organiza- $JSfi Revenue Act Pawnbrokers Ship brokers Customs brokers Proprietors of amuse- ment places tion was $2,000 or more but not more than $5,000, $100; if such value was more than $5,000, $150. (2) Pawnbrokers shall pay $100. Every person whose business or occupation it is to take or receive, by way of pledge, pawn, or exchange, any goods, wares, or merchandise, or any kind of personal prop- erty whatever, as security for the repayment of money loaned thereon, shall be regarded as a pawn- broker. (3) Ship brokers shall pay $50. Every person whose business it is as a broker to negotiate freights and other business for the owners of vessels, or for the shippers or consignors or consignees of freight carried by vessels, shall be regarded as a ship broker. (4) Customhouse brokers shall pay $50. Every person whose occupation it is, as the agent of others, to arrange entries and other customhouse papers, or transact business at any port of entry relating to the importation or exportation of goods, wares, or merchandise, shall be regarded as a customhouse broker. (5) Proprietors of theaters, museums, and con- cert halls, where a charge for admission is made, having a seating capacity of not more than two hun- dred and fifty, shall pay $50 ; having a seating ca- pacity of more than two hundred and fifty and not exceeding five hundred, shall pay $100; having a seating capacity exceeding five hundred and not ex- ceeding eight hundred, shall pay $150; having a seating capacity of more than eight hundred, shall pay $200. Every edifice used for the purpose of dramatic or operatic or other representations, plays, or performances, for admission to which entrance money is received, not including halls or armories rented or used occasionally for concerts or theatrical representations, and not including edifices owned by religious, educational or charitable institutions, Special Taxis 1^''' societies or organizations where all the proceeds from admissions inure exclusively to the benefit of such institutions, societies or organizations or exclu- sively to the benefit of persons in the military or naval forces of the United States, shall be regarded as a theatre; Provided, That in cities, towns, or Tax rates in towni villages of five thousand inhabitants or less the ""**«'' ^^^^ amount of such payment shall be one-half of that above stated; Provided further. That whenever any such edifice is under lease at the time the tax is due, Leased hafls the tax shall be paid by the lessee, unless otherwise stipulated between the parties to the lease. (6) The proprietor or proprietors of circuses Circus proprietors shall pay $100. Every building, space, tent, or area, where feats of horsemanship or acrobatic sports or theatrical performances not otherwise pro- vided for in this section are exhibited shall be re- garded as a circus; Provided, That no special tax paid in one State, Territory, or the District of Columbia shall exempt exhibitions from the tax in another State, Territory, or the District of Colum- bia, and but one special tax shall be imposed for exhibitions within any one State, Territory, or Dis- trict. (7) Proprietors or agents of all other public ex- Proprietors of hibitions or shows for money not enumerated in this «hibitions section shall pay $15; Provided, That a special tax paid in one State, Territory, or the District of Col- umbia shall not exempt exhibitions from the tax in another State, Territory, or the District of Colum- bia, and but one special tax shall be required for exhibitions within any one State, Territory, or the District of Columbia; Provided further, That this Exceptions paragraph shall not apply to Chautauquas, lecture lyceums, agricultural or industrial fairs, or exhibi- tions held under the auspices of religious or charit- able associations ; Provided further, That an aggre- ^ IM Revekui Act Proprietors of bowling alleys and billiard rooms Proprietors of shooting galleries Proprietors of riding academies Persons renting autos for hire Brewers, AstiHers and liquor dealers gation of entertainments, known as a street fair, shall not pay a larger tax than $100 in any State, Territory, or in the District of Colximbia. (8) Proprietors of bowling alleys and bilUard rooms shall pay $10 for each alley or table. Every building or place where bowls are thrown or where games of billiards or pool are played, except in pri- vate homes, shall be regarded as a bowling alley or a billiard room, respectively. (9) Proprietors of shooting galleries shall pay $20. Every building, space, tent, or area, where a charge is made for the discharge of firearms at any form of target shall be regarded as a shooting gallery. (10) Proprietors of riding academies shall pay $100. Every building, space, tent, or area, where a charge is made for instruction in horsemanship or for facilities for the practice of horsemanship shall be regarded as a riding academy. (11) Persons carrying on the business of operat- ing or renting passenger automobiles for hire shall pay $10 for each such automobile having a seating capacity of more than two and not more than seven, and $20 for each such automobile having a seating capacity of more than seven. (12) Every person carrying on the business of a brewer, distiller, wholesale liquor dealer, retail liquor dealer, wholesale dealer in malt liquor, retail dealer in malt liquor, or manufacturer of stills, as defined in section 3244 as amended and section 3247 of the Revised Statutes, in any State, Territory, or District of the United States contrary to the laws of such State, Territory, or District, or in any place therein in which carrying on such business is pro- hibited by local or municipal law, shall pay, in ad- dition to all other taxes, special or otherwise, im- posed by existing law or by this Act, $1,000. SfeoialTaxks 169 The payment of the tax imposed by this sub- i division shall not be held to exempt any person from any penalty or punishment provided for by the laws of any State, Territory, or District for carrying on such business in such State, Territory, or District, or in any manner to authorize the commencement or continuance of such business contrary to the laws of such State, Territory, or District, or in places prohibited by local or municipal law. The taxes imposed by this section shall, in the case of persons upon whom a corresponding tax is imposed by section 407 of the Revenue Act of 1916, be in lieu of such tax. Sec. 1002. That on and after January 1, 1919, Annual sales; uxa* there shall be levied, collected, and paid annually, <»: effective dale in lieu of the taxes imposed by section 408 of the Revenue Act of 1916, the following special taxes, the amount of such taxes to be computed on the basis of the sales for the preceding year ending June 30— Manufacturers of tobacco whose annual sales do Tobacco manu- not exceed fifty thousand pounds shall each pay $6 ; toners R Manufacturers of tobacco whose annual sales ex- ceed fifty thousand and do not exceed one hundred thousand pounds shall each pay $12; Manufacturers of tobacco whose annual sales ex- ceed one hundred thousand and do not exceed two hundred thousand pounds shall each pay $24; Manufacturers of tobacco whose annual sales ex- ceed two hundred thousand pounds shall each pay $24, and at the rate of 16 cents per thousand pounds, or fraction thereof, in respect to the excess over two hundred thousand pounds; Manufacturers of cigars whose annual sales do Ggar not exceed fifty thousand cigars shall each pay $4 ; n>«nufacture Manufacturers of cigars whose annual sales ex- 100 Revenue Act Ggarette manufacturers Tax on use of pleasure boats, effective date Qassification and rates ceed fifty thousand and do not exceed one hundred thousand cigars shall each pay $6 ; Manufacturers of cigars whose annual sales ex- ceed one hundred thousand and do not exceed two hundred thousand cigars shall each pay $12; Manufacturers of cigars whose annual sales ex- ceed two hundred thousand and do not exceed four hundred thousand cigars shall each pay $24 ; Manufacturers of cigars whose annual sales ex- ceed four hundred thousand cigars shall each pay $24, and at the rate of 10 cents per thousand cigars, or fraction thereof, in respect to the excess over four hundred thousand cigars ; Manufacturers of cigarettes, including small cigars weighing not more than three pounds per thousand, shall each pay at the rate of 6 cents for every ten thousand cigarettes, or fraction thereof. In arriving at the amount of special tax to be paid under this section, and in the levy and collec- tion of such tax, each person engaged in the manu- facture of more than one of the classes of articles specified in this section shall be considered and deemed a manufacturer of each class separately. Sec. 1003. That sixty days after the passage of this Act, and thereafter on July 1 in each year, and also at the time of the original purchase of a new boat by a user, if on any other date than July 1, there shall be levied, assessed, collected, and paid in lieu of the tax imposed by section 603 of the Reve- nue Act of 1917, upon the use of yachts, pleasure boats, power boats, and sailing boats, of over five net tons, and motor boats with fixed engines, not used exclusively for trade, fishing or national de- fense, or not built according to plans and specifica- tions approved by the Navy Department, a special excise tax to be based on each yacht or boat, at rates as follows: Yachts, pleasure boats, power boats. Special Taxes 101 motor boats with fixed engines, and sailing boats, of over five net tons, length not over fifty feet, $1 for each foot; length over fifty feet and not over one hundred feet, $2 for each foot ; length over one hun- dred feet, $4 for each foot ; motor boats of not over five net tons with fixed engines, $10. In determining the length of such yachts, pleas- Measurement of ure boats, power boats, motor boats with fixed en- **"«*** gines, and sailing boats, the measurement of over-all length shall govern. In the case of a tax imposed at the time of the ^ax for portion of original purchase of a new boat on any other date than July 1, and in the case of the tax taking effect sixty days after the passage of this Act, the amount to be paid shall be the same number of twelfths of the amount of the tax as the number of calendar months (including the month of sale, or the month in which is included the sixty-first day after the passage of this Act, as the case may be) remaining prior to the following July 1. If the tax imposed by section 603 of the Revenue Credit for tax paid Act of 1917, for the fiscal year ending June 30, ^^e'^ Revenue Act 1919, has been paid in respect to the use of any boat, the amount so paid shall under such regulations as the Commissioner, with the approval of the Secre- tary, may prescribe, be credited upon the first tax due under this section in respect to the use of such boat, or be refunded to the person paying the first tax imposed by this section in respect to the use of such boat. Sec. 1004. That if the tax imposed by section Credit for tax paid 407 or 408 of the Revenue Act of 1916, for the fiscal ""**«^ R*'^^""^ Act year ending June 30, 1919, has been paid by any person subject to the corresponding tax imposed by this title, collectors may issue a receipt in lieu of special tax stamp for the amount by which the tax under this title is in excess of that paid or payable i 162 Retbitue Act Penalty for failure to pay occupational tax Harrison Narcotic Act amended Tax on dealer in drugs Registration of drug dealers and evidenced by stamp under the Revenue Act of 1916. Such receipt shall be posted as in the case of the special tax stamp, as provided by law, and with it, within the place of business of the taxpayer. If the corresponding tax imposed by section 407 of the Revenue Act of 1916 was not payable by stamp, the amount paid under such section for any period for which a tax is also imposed by this title may be credited against the tax imposed by this title. Sec. 1005. That any person who carries on any business or occupation for which a special tax is im- posed by sections 1000, 1001, or 1002, without hav- ing paid the special tax therein provided, shall, be- sides being liable for the payment of such special tax, be subject to a penalty of not more than $1,000 or to imprisonment for not more than one year, or both. Sec. 1006. That section 1 of the Act of Congress approved December 17, 1914, is hereby amended to read as follows: "Section 1. That on or before July 1 of each year every person who imports, manufactures, pro- duces, compounds, sells, deals in, dispenses, or gives away opium or coca leaves, or any compound manu- facture, salt, derivative, or preparation thereof, shall register with the collector of internal revenue of the district his name or style, place of business and place or places where such business is to be carried on, and pay the special taxes hereinafter provided ; "Every person who on January 1, 1919, is en- gaged in any of the activities above enumerated, or who between such date and the passage of this Act first engages in any of such activities, shall within 30 days after the passage of this Act make like regis- tration, and shall pay the proportionate part of the tax for the period ending June 30, 1919 ; and "Every person who first engages in any of such t Spbczal Taxks 168 activities after the passage of this Act shall immedi- V ately make like registration and pay the propor- i tionate part of the tax for the period ending on the ; following June 30th ; ^ ; "Importers, manufacturers, producers, or com- Rates of tax I pounders, $24 per annum; wholesale dealers, $12 I per annum ; retail dealers, $6 per annum ; physicians, [ dentists, veterinary surgeons, and other practition- 5 ers lawfully entitled to distribute, dispense, give f away, or administer any of the aforesaid drugs to [ patients upon whom they in the course of their pro- j. f essional practice are in attendance, shall pay $3 per I.;- annum. Every person who imports, manufactures, com- Definitions: r pounds, or otherwise produces for sale or distribu- in»p®'^*«»'» "«»"• H.. n i.\^ J* 'jj inT_j jj. facturer or producer I tion any oi the aforesaid drugs shall be deemed to fi be an importer, manufacturer, or producer. I "Every person who sells or offers for sale any of wholesale dealer I said drugs in the original stamped packages, as I hereinafter provided, shall be deemed a wholesale I dealer. "Every person who sells or dispenses from orig- Retail dealer inal stamped packages, as herein provided, shall be deemed a retail dealer ; Provided, That the office. Place of business or if none, the residence, of any person shall be con- sidered for the purpose of this Act his place of busi- Exceptions: ness ; but no employee of any person who has regis- Employees tered and paid special tax as herein required, acting within the scope of his employment, shall be required to register and pay special tax provided by this sec- tion; Provided further. That officials of the United Public officials States, Territorial, District of Columbia, or insular possessions. State or municipal governments, who in the exercise of their official duties engage in any of the business herein described, shall not be re- quired to register, nor pay special tax, nor stamp the aforesaid drugs as hereinafter prescribed, but IM Reveitue Act Registration must precede dealing Person defined Tax on drugs Rate Use of original stamped packages their right to this exemption shall be evidenced in such manner as the Commissioner of Internal Reve- nue, with the approval of the Secretary of the Treas- ury, may by regulations prescribe. "It shall be unlawful for any person required to register under the provisions of this Act to import, manufacture, produce, compound, sell, deal in, dis- pense, distribute, administer, or give away any of the aforesaid drugs without having registered and paid the special tax as imposed by this section. "That the word 'person' as used in this Act shall be construed to mean and include a partnership, association, company, or corporation, as well as a natural person ; and all provisions of existing law re- lating to special taxes, as far as necessary, are here- by extended and made applicable to this section. "That there shall be levied, assessed, collected, and paid upon opium, coca leaves, any compound, salt, derivative, or preparation thereof, produced in or imported into the United States, and sold, or re- moved for consumption or sale, an internal-revenue tax at the rate of 1 cent per ounce, and any fraction of an ounce in a package shall be taxed as an ounce, such tax to be paid by the importer, manufacturer, producer, or compoimder thereof, and to be repre- sented by appropriate stamps, to be provided by the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury; and the stamps herein provided shall be so affixed to the bot- tle or other container as to securely seal the stopper, covering, or wrapper thereof. "The tax imposed by this section shall be in addi- tion to any import duty imposed on the aforesaid drugs. "It shall be unlawful for any person to purchase, sell, dispense, or distribute any of the aforesaid drugs except in the original stamped package or Special Taxes 195 from the original stamped package ; and the absence of appropriate tax-paid stamps from any of the aforesaid drugs shall be prima facie evidence of a violation of this section by the person in whose pos- session same may be found; and the possession of any original stamped package containing any of the aforesaid drugs by any person who has not regis- tered and paid special taxes as required by this sec- tion shall be prima facie evidence of liabiUty to such special tax; Provided, That the provisions of this Exceptions paragraph shall not apply to any person having in his or her possession any of the aforesaid drugs which have been obtained from a registered dealer in pursuance of a prescription, written for legiti- mate medical uses, issued by a physician, dentist, veterinary surgeon, or other practitioner registered under this Act; and where the bottle or other con- tainer in which such drug may be put up by the dealer upon said prescription bears the name and registry number of the druggist, serial number of prescription, name and address of the patient, and name, address, and registry number of the person writing said prescription; or to the dispensing, or administration, or giving away of any of the afore- said drugs to a patient by a registered physician, dentist, veterinary surgeon, or other practitioner in the course of his professional practice, and where said drugs are dispensed or administered to the pa- tient for legitimate medical purposes, and the record kept as required by this Act of the drugs so dis- pensed, administered, distributed, or given away. "And all the provisions of existing laws relating Extension of reyenue to the engraving, issuance, sale, accountability, can- «»»"p *«w cellation, and destruction of tax-paid stamps pro- vided for in the internal-revenue laws are, in so far as necessary, hereby extended and made to apply to stamps provided by this section. 166 RcvBirns Act Unstamped packages subject to seizure Records and returns Regulations by Conunissioner Act of December 17, 1914, amended Exceptions "That all unstamped packages of the aforesaid drugs found in the possession of any person, except as herein provided, shall be subject to seizure and forfeiture, and all the provisions of existing inter- nal-revenue laws relating to searches, seizures, and forfeitures of unstamped articles are hereby ex- tended to and made to apply to the articles taxed under this Act and the persons upon whom these taxes are imposed. "Importers, manufacturers, and wholesale deal- ers shall keep such books and records and render such monthly returns in relation to the transactions in the aforesaid drugs as the Commissioner of In- ternal Revenue, with the approval of the Secretary of the Treasury, may by regulations require. "The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make all needful rules and regulations for carrying the provisions of this Act into effect." Sec. 1007. That section 6 of such Act of De- cember 17, 1914, is hereby amended to read as fol- lows: "Sec. 6. That the provisions of this Act shall not be construed to apply to the manufacture, sale, dis- tribution, giving away, dispensing, or possession of preparations and remedies which do not contain more than two grains of opium, or more than one- fourth of a grain of morphine, or more than one- eighth of a grain of heroin, or more than one grain of codeine, or any salt or derivative of any of them in one fluid ounce, or, if a solid or semisolid prepara- tion, in one avoirdupois ounce; or to liniments, oint- ments, or other preparations which are prepared for external use only, except liniments, ointments, and other preparations which contain cocaine or any of its salts or alpha or beta eucaine or any of their salts jT any synthetic substitute for them ; Provided, That Special Taxss ^^'^ such remedies and preparations are manufactured, sold, distributed, given away, dispensed, or pos- sessed as medicines and not for the purpose of evad- ing the intentions and provisions of this Act; Pro- vided further. That any manufacturer, producer, compounder, or vendor (including dispensing phy- sicians) of the preparations and remedies men- tioned in this section shall keep a record of all sales, exchanges, or gifts of such preparations and reme- dies in such manner as the Commissioner of Inter- nal Revenue, with the approval of the Secretary of the Treasury, shall direct. Such record shall be preserved for a period of two years in such a way as to be readily accessible to inspection by any offi- cer, agent, or employee of the Treasury Depart- ment duly authorized for that purpose, and the state, territorial, district, municipal, and insular offi- cers named in section 5 of this act, and every such person so possessing or disposing of such prepara- tions and remedies shall register as required in sec- Registration tion 1 of this act and, if he is not paying a tax under this act, he shall pay a special tax of $1 for each Special tax year, or fractional part thereof, in which he is en- gaged in such occupation, to the collector of internal revenue of the district in which he carries on such occupation as provided in this act. The provisions of this act as amended shall not apply to decocain- ized coca leaves or preparations made therefrom, or to other preparations of coca leaves which do not contain cocaine.*' Sec. 1008. That all opium, its salts, derivatives, Confiscation of and compounds, and coca leaves, salts, derivatives, **™«» and compounds thereof, which may now be under seizure or which may hereafter be seized by the United States Government from any person or per- sons charged with any violation of the Act of Octo- ber 1, 1890, as amended by the Acts of March 3, 168 Revexue Act 1897, February 9, 1909, and January 17, 1914, or the Act of December 17, 1914, shall upon conviction of the person or persons from whom seized be con- fiscated by and forfeited to the United States ; and Disposition of the Secretary is hereby authorized to deUver for confiscated drugs mcdical or Scientific purposes to any department, bureau, or other agency of the United States Gov- ernment, upon proper application therefor under such regulation as may be prescribed by the Com- missioner, with the approval of the Secretary, any of the drugs so seized, confiscated, and forfeited to the United States. The provisions of this section shall also apply to any of the aforesaid drugs seized or coming into the possession of the United States in the enforcement of any of the above-mentioned Acts where the own- er or owners thereof are unknown. None of the aforesaid drugs coming into possession of the United States under the operation of said Acts, or the pro- visions of this section, shall be destroyed without certification by a committee appointed by the Com- missioner, with the approval of the Secretary, that they are of no value for medical or scientific pur- poses. Repeal of prior acu Sec. 1009. That the Act approvcd October 22, 1914, entitled "An Act to increase the internal rev- enue, and for other purposes," and the joint resolu- tion approved December 17, 1915, entitled "Joint resolution extending the provisions of the Act en- titled *An Act to increase the internal revenue, and for other purposes,' approved October twenty-sec- ond, nineteen hundred and fourteen, to December thirty-first, nineteen hundred and sixteen," are here- by repealed, except that the provisions of such Act shall remain in force for the assessment and collec- tion of all special taxes imposed by sections 3 and 4 thereof, or by such sections as extended by such Special Taxes 169 joint resolution, for any year or part thereof ending prior to January 1, 1917, and of all other taxes im- posed by such Act, or by such Act as so extended, accrued prior to September 8, 1916, and for the im- position and collection of all penalties or forfeitures which have accrued or may accrue in relation to any of such taxes. TITLE XL Stamp Taxes Stamp taxes, effective date Basis of tax Exemptions: Obligations of governments Bonds reqinred by United States Securities of mutual building and loan and ditch companies Sec. 1100. That on and after April 1, 1919, there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certifi- cates of stock and of indebtedness, and other docu- ments, instruments, matters, and things mentioned and described in Schedule A of this title, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, are written or printed, by any person who makes, signs, issues, sells, removes, consigns, or ships the same, or for whose use or benefit the same are made, signed, issued, sold, removed, consigned, or shipped, the several taxes specified in such schedule. The taxes imposed by this section shall, in the case of any article upon which a corresponding stamp tax is now imposed by law, be in Ueu of such tax. Sec. 1101. That there shall not be taxed under this title any bond, note, or other instrument, issued by the United States, or by any foreign Govern- ment, or by any State, Territory, or the District of Columbia, or local subdivision thereof, or municipal or other corporation exercising the taxing power; or any bond of indemnity required to be filed by any person to secure payment of any pension, allowance, allotment, rehef, or insurance by the United States; or stocks and bonds issued by cooperative building and loan associations which are organized and oper- ated exclusively for the benefit of their members and make loans only to their shareholders, or by mutual ditch or irrigating companies. 170 Stamp Taxes 171 Sec. 1102. That whoever— (a) Makes, signs, issues, or accepts, or causes to Pemliy for non- I be made, signed, issued, or accepted, any instrument, p*^™®"* ®' *" document, or paper of any kind or description what- soever without the full amount of tax thereon being duly paid; (b) Consigns or ships, or causes to be consigned or shipped, by parcel post any parcel, package, or article without the full amount of tax being duly paid ; (c) Manufactures or imports and sells, or offers for sale, or causes to be manufactured or imported and sold, or offered for sale, any playing cards, package, or other article without the full amount of tax being duly paid; (d) Makes use of any adhesive stamp to denote any tax imposed by this title without cancelling or obliterating such stamp as prescribed in section 1104; Is guilty of a misdemeanor and upon convic- tion thereof shall pay a fine of not more than $100 for each oflFense. Sec. 1103. That whoever — (a) Fraudulently cuts, tears, or removes from Penally for fraudulent any vellum, parchment, paper, instrument, writing, ""*"*® ®' •'^"p* package, or article, upon which any tax is imposed by this title, any adhesive stamp or the impression of any stamp, die, plate, or other article provided, made, or used in pursuance of this title; (b) Fraudulently uses, joins, fixes, or places to, with, or upon any vellum, parchment, paper, instru- ment, writing, package, or article, upon which any tax is imposed by this title, ( 1 ) any adhesive stamp, or the impression of any stamp, die, plate, or other article, which has been cut, torn, or removed from any other vellum, parchment, paper, instrument, writing, package, or article, upon which any tax is ITt REYEirnE Act imposed by this title; or (2) any adhesive stamp or the impression of any stamp, die, plate, or other article of insufficient value; or (3) any forged or counterfeit stamp, or the impression of any forged or counterfeited stamp, die, plate, or other article; (c) Willfully removes, or alters the cancellation, or defacing marks of, or otherwise prepares, any ad- hesive stamp, with intent to use, or cause the same to be used, after it has been already used, or know- ingly or willfully buys, sells, offers for sale, or gives away, any such washed or restored stamp to any person for use, or knowingly uses the same ; (d) Knowingly and without lawful excuse (the burden of proof of such excuse being on the ac- cused) has in possession any washed, restored, or altered stamp, which has been removed from any vellum, parchment, paper, instrument, writing, package, or article; Is guilty of a misdemeanor, and upon conviction shall be punished by a fine of not more than $1,000, or by imprisonment for not more than five years, or both, and any such reused, cancelled, or counterfeit stamp and the vellum, parchment, document, paper, package, or article upon which it is placed or im- pressed shall be forfeited to the United States. Sec. 1104. That whenever an adhesive stamp is used for denoting any tax imposed by this title, ex- cept as hereinafter provided, the person using or affixing the same shall write or stamp or cause to be written or stamped thereupon the initials of his or its name and the date upon which the same is at- tached or used, so that the same may not again be used; Provided, That the Commissioner may pre- scribe such other method for the cancellation of such stamps as he may deem expedient. Preparation and Sec. 1105. (a) That thc Commissioucr shall distribution of stamps causc to bc prepared and distributed for the pay- Cancellation of stamps Stamp Taxes IW ment of the taxes prescribed in this title suitable stamps denoting the tax on the document, articles, or thing to which the same may be affixed, and shall prescribe such method for the affixing of said stamps in substitution for or in addition to the method pro- vided in this title, as he may deem expedient. (b) The Commissioner, with the approval of the Secretary, is authorized to procure any of the stamps provided for in this title by contract when- ever such stamps can not be speedily prepared by the Bureau of Engraving and Printing; but this authority shall expire on January 1, 1920, except as to imprinted stamps furnished under contract, authorized by the Commissioner. (c) All internal-revenue laws relating to the as- Extension of sessment and collection of taxes are hereby extended '«^®""« '*^* to and made a part of this title, so far as applicable, for the purpose of collecting stamp taxes omitted ^ through mistake or fraud from any instrument, document, paper, writing, parcel, package, or article named herein. Sec. 1106. That the Commissioner shall furnish Sale of stamps to the Postmaster General without prepayment a >tp®»to^>«« suitable quantity of adhesive stamps to be distrib- uted to and kept on sale by the various postmasters in the United States. The Postmaster General mav require each such postmaster to give additional or increased bond as postmaster for the value of the stamps so furnished, and each such postmaster shall deposit the receipts from the sale of such stamps to the credit of and render accounts to the Postmaster General at such times and in such form as he may by regulations prescribe. The Postmaster General shall at least once monthly transfer all collections from this source to the Treasury as internal-revenue collections. k 174 RiTEKUB Act Sale by Asnstant Treasurer and designated depositaries Bonds, issue of, or renewal Rate, 5c per $100 Indemnity and surety bonds, and fidelity or guarantee policies, tax 50c Sec. 1107. That the collectors of the several dis- tricts shall furnish without prepayment to any as- sistant treasurer or designated depositary of the United States located in their respective collection districts a suitable quantity of adhesive stamps for sale. In such cases the collector may require a bond, with sufficient sureties, to an amount equal to the value of the adhesive stamps so furnished, condi- tioned for the faithful return, whenever so required, of all quantities or amounts undisposed of, and for the payment monthly of all quantities or amounts sold or not remaining on hand. The Secretary may from time to time make such regulations as he may find necessary to insure the safekeeping or prevent the illegal use of all such adhesive stamps. Schedule A. — Stamp Taxes. 1. Bonds of indebtedness: On all bonds, deben- tures, or certificates of indebtedness issued by any person, and all instruments, however termed, issued by any corporation with interest coupons or in regis- tered form, known generally as corporate securities, on each $100 of face value or fraction thereof, 5 cents; Provided, That every renewal of the fore- going shall be taxed as a new issue; Provided further. That when a bond conditioned for the re- payment or payment of money is given in a penal sum greater than the debt secured, the tax shall be based upon the amount secured. 2. Bonds, indemnity and surety: On all bonds executed for indemnifying any person who shall have become bound or engaged as surety, and on all bonds executed for the due execution or perform- ance of any contract, obligation or requirement, or the duties of any office or position, and to account for money received by virtue thereof, and on all policies of guaranty and fideUty insurance, includ- Stamp Taxes 170 ing policies guaranteeing titles to real estate and mortgage guarantee policies, and on all other bonds of any description, made, issued, or executed, not otherwise provided for in this schedule, except such as may be required in legal proceedings, 50 cents ; Rates, soc, or ic per Provided, That where a premium is charged for the $i «' premium issuance, execution, renewal or continuance of such bond the tax shall be 1 cent on each dollar or frac- tional part thereof of the premium charged; Pro- vided further. That policies of reinsurance shall be Reinsurance exempt exempt from the tax imposed by this subdivision. 3. Capital stock, issue: On each original issue, Capital stock, issue whether on organization or reorganization, of cer- "'» '**® ^' p*' ^^®® tificates of stock, or of profits, or of interest in prop- erty or accumulations, by any corporation, on each $100 of face value or fraction thereof, 5 cents; Pro- vided, That where a certificate is issued without face value, the tax shall be 5 cents per share, unless the actual value is in excess of $100 per share, in which case the tax shall be 5 cents on each $100 of actual value or fraction thereof. The stamps representing the tax imposed by this Stamps affixed to subdivision shall be attached to the stock books and **^^ ^*^^» not to the certificates issued. 4. Capital stock, sales or transfers : On all sales, stock, sales or or agreements to sell, or memoranda of sales or de- transfers liveries of, or transfers of legal title to shares or cer- tificates of stock or of profits or of interest in prop- ety or accumulations in any corporation, or to rights to subscribe for or to receive such shares or certifi- cates, whether made upon or shown by the books of the corporation, or by any assignment in blank, or by any delivery, or by any paper or agreement or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock, interest, or rights, or not, on each $100 of face value or fraction thereof, 2 cents. Rate, 2c per $ioo 176 Reyekue Act Exceptions: (1) Deposit of stock as collateral sale and where such shares are without par or face value, the tax shall be 2 cents on the transfer or sale or agreement to sell on each share, unless the actual value thereof is in excess of $100 per share, in which case the tax shall be 2 cents on each $100 of actual value or fraction thereof; Provided, That it is not intended by this title to impose a tax upon an agree- ment evidencing a deposit of certificates as collateral security for money loaned thereon, which certificates are not actually sold, nor upon the delivery or trans- fer for such purpose of certificates so deposited; Provided further, That the tax shall not be imposed (2) Transfer to broker upou deliveries or trausf crs to a broker for sale, nor upon deliveries or transfers by a broker to a cus- tomer for whom and upon whose order he has pur- chased same, but such deliveries or transfers shall be accompanied by a certificate setting forth the facts ; Provided further, That in case of sale where the evidence of transfer is shown only by the books of the corporation the stamp shall be placed upon such books; and where the change of ownership is by transfer of the certificate the stamp shall be placed upon the certificate; and in cases of an agreement to sell or where the transfer is by delivery of the cer- tificate assigned in blank there shall be made and delivered by the seller to the buyer a bill or memo- randum of such sale, to which the stamp shall be affixed; and every bill or memorandum of sale or agreement to sell before mentioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. Any person liable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person, who makes any such sale, or who in pursuance of any such sale delivers any certificate or evidence of the sale of any stock, interest or right, or biU or memorandum thereof, as herein required. Stamps, where affixed Penalties Stamp Taxes 177 without having the proper stamps ajfiixed thereto with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon con- viction thereof shall pay a fine of not exceeding $1,000, or be imprisoned not more than six months, or both. 5, Produce, sales of, on exchange: Upon each Sales on produce sale, agreement of sale, or agreement to sell (not «"*»*"«• including so-called transferred or scratch sales), any products or merchandise at, or under the rules or usages of, any exchange, or board of trade, or other similar place, for future delivery, for each $100 in value of the merchandise covered by said For future deiifery, sale or agreement of sale or agreement to sell, 2 *a»2cper$ioo cents, and for each additional $100 or fractional part thereof in excess of $100, 2 cents; Provided, That Stamps to be affixed on every sale or agreement of sale or agreement to *®"®™®'^*" ao sae sell as aforesaid there shall be made and delivered by the seller to the buyer a bill, memorandum, agree- ment, or other evidence of such sale, agreement of sale, or agreement to sell, to which there shall be affixed a lawful stamp or stamps in value equal to the amount of the tax on such sale; Provided fur- Transfers of contracts ther. That sellers of commodities described herein, ** ci^aring-house not a sale having paid the tax provided by this subdivision, may transfer such contracts to a clearing-house cor- poration or association, and such transfer shall not be deemed to be a sale, or agreement of sale, or an agreement to sell within the provisions of this Act, provided that such transfer shall not vest any bene- ficial interest in such clearing-house association but shall be made for the sole purpose of enabling such clearing-house association to adjust and balance the accounts of the members of such clearing-house association on their several contracts. Every such bill, memorandum, or other evidence of sale or agreement to sell shall show the date thereof, the 178 Revenue A ct Penalty Sales for immediate delivery not taxed Promissory notes and time drafts Rates, 2c per $100 Exemption of notes secured by U. S. war obligations, or by notes so secured name of the seller, the amount of the sale, and the matter or thing to which it refers ; and any person hable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person, who makes any such sale or agreement of sale, or agi'eement to sell, or who, in pursuance of any such sale, agreement of sale or agreement to sell, delivers any such products or merchandise without a bill, memorandum, or other evidence thereof as herein required, or who delivers such bill, memorandum, or other evidence of sale, or agi*ee- ment to sell, without having the proper stamps af- fixed thereto, with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not exceeding $1,000 or be imprisoned not more than six months, or both. No bill, memorandum, agreement, or other evi- dence of such sale, or agreement of sale, or agree- ment to sell, in case of cash sales of products or mer- chandise for immediate or prompt delivery which in good faith are actually intended to be delivered shall be subject to this tax. 6. Drafts or checks (payable otherwise than at sight or on demand) upon their acceptance or deliv- ery within the United States whichever is prior, promissory notes, except bank notes issued for cir- culation, and for each renewal of the same, for a siun not exceeding $100, 2 cents; and for each addi- tional $100 or fractional part thereof, 2 cents. This subdivision shall not apply to a promissory note secured by the pledge of bonds or obligations of the United States issued after April 24, 1917, or secured by the pledge of a promissory note which itself is secured by the pledge of such bonds or obli- gations ; Provided, That in either case the par value Stamp Taxes \19 of such bonds or obligations shall be not less than the amount of such note. 7. Conveyances: Deed, instrument, or writing, Conveyances whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to or vested in, the purchaser or purchas- ers, or any other person or persons, by his, her, or their direction, when the consideration or value of the interest or property conveyed, exclusive of the value of any hen or encumbrance remaining thereon at the time of sale, exceeds $100 and does not exceed Raic» $500, 50 cents ; and for each additional $500 or frac- tional part thereof, 50 cents. This subdivision shall not apply to any instrument or writing given to secure a debt. 8. Entry of any goods, wares, or merchandise Customhouse entries at any customhouse, either for consumption or ware- housing, not exceeding $100 in value, 25 cents; ex- Rates ceeding $100 and not exceeding $500 in value, 50 cents ; exceeding $500 in value, $1. 9. Entry for the withdrawal of any goods or mer- Entries for with- chandise from customs bonded warehouse, 50 cents. 10. Passage ticket, one way or round trip, for Passage tickets each passenger, sold or issued in the United States for passage by any vessel to a port or place not in the United States, Canada, or Mexico, if costing not ^*'®* exceeding $30, $1 ; costing more than $30 and not exceeding $60, $3 ; costing more than $60, $5. This subdivision shall not apply to passage tickets cost- ing $10 or less. 11. Proxy for voting at any election for officers, ^roide% or meeting for the transaction of business, of any corporation, except religious, educational, charita- ble, fraternal, or literary societies, or public ceme- teries, 10 cents. 12. Power of attorney granting authority to do Powers of attorney or perform some act for or in behalf of the grantor, 180 RevenueAct which authority is not otherwise vested in the grantee, 25 cents. This subdivision shall not apply to any papers necessary to be used for the collection of claims from the United States or from any State for pensions, back pay, bounty, or for property lost in the mihtary or naval service, or to powers of at- torney required in bankruptcy cases. Playing cards 13. Playing cards: Upon every pack of playing cards containing not more than fifty-four cards, manufactured or imported, and sold, or removed for consumption or sale, a tax of 8 cents per pack. Parcel post packages 14. Parccl-post packagcs : Upon every parcel or package transported from one point in the United States to another by parcel post on which the post- age amounts to 25 cents or more, a tax of 1 cent for each 25 cents or fractional part thereof charged for such transportation, to be paid by the consignor. No such parcel or package shall be transported until a stamp or stamps representing the tax due shall have been aiiixed thereto. Policies and renewals 15. On cach policy of insuraucc, or certificate, of property insurance binder, covcring notc, memorandum, cablegram, let- ter, or other instrument by whatever name called whereby insurance is made or renewed upon prop- erty within the United States (including rents and profits) against peril by sea or on inland waters or in transit on land (including transshipments and storage at termini or way points) or by fire, light- ning, tornado, wind-storm, bombardment, invasion, insurrection or riot, issued to or for or in the name of a domestic corporation or partnership or an indi- vidual resident of the United States by any foreign corporation or partnership or any individual not a resident of the United States, when such policy or other instrument is not signed or countersigned by an officer or agent of the insurer in a State, Terri- tory, or district of the United States within which S T A M P T A X E 8 181 such insurer is authorized to do business, a tax of 3 cents on each dollar or fractional part thereof of the premium charged; Provided, That policies of re-insurance shall be exempt from the tax imposed by this subdivision. Any person to or for whom or in whose name any By whom stamp is such poUcy or other instrument is issued, or any lo be affixed solicitor or broker acting for or on behalf of such person in the procurement of any such policy or other instrument, shall affix the proper stamps to such policy or other instrument, and for failure to affix such stamps with intent to evade the tax shall, in addition to other penalties provided therefor, pay a fine of double the amount of the tax. Tax on employers of child labbr, operating: Mines or quarries Mills or factories What constitutes child labor Tax rate, 10 per cent of net profits Computation of net profits Deductions: TITLE XII # Tax on Employment of Child Labor Sec. 1200. That every person (other than a bona fide boys' or girls' canning club recognized by the Agricultural Department of a State and of the United States) operating (a) any mine or quarry situated in the United States in which children un- der the age of sixteen years have been employed or permitted to work during any portion of the taxable year; or (b) any mill, cannery, workshop, factory, or manufacturing establishment situated in the United tates in which children under the age of fourteen years have been employed or permitted to work, or children between the ages of fourteen and sixteen have been employed or permitted to work more than eight hours in any day or more than six days in any week, or after the hour of seven o'clock post meridian, or before the hour of six o'clock ante meridian, during any portion of the taxable year, shall pay for each taxable year, in ad- dition to all other taxes imposed by law, an excise tax equivalent to 10 per centum of the entire net profits received or accrued for such year from the sale or disposition of the product of such mine, quarry, mill, cannery, workshop, factory, or manu- facturing establishment. Sec. 1201. That in computing net profits under the provisions of this title, for the purpose of the tax there shall be allowed as deductions from the gross amount received or accrued for the taxable year from the sale or disposition of such products manu- 182 Employment of Child Labor 183 factured within the United States the following items : (a) The cost of raw materials entering into the Raw materials production; (b) Running expenses, including rentals, cost of Expense* of business repairs, and maintenance, heat, power, insurance, management, and a reasonable allowance for sala- ries or other compensations for personal services ac- tually rendered, and for depreciation ; (c) Interest paid within the taxable year on interest paid debts or loans contracted to meet the needs of the business, and the proceeds of which have been ac- tually used to meet such needs ; (d) Taxes of all kinds paid during the taxable Taxes year with respect to the business or property relat- ing to the production ; and (e) Losses actually sustained within the taxable Losses year in connection with the business of producing such products, including losses from fire, flood, storm, or other casualties, and not compensated for by insurance or otherwise. Sec. 1202. That if any such person during any Sales below fair taxable year or part thereof, whether under any market price to be agreement, arrangement, or understanding or oth- ^J7^ir*^ricr *"* erwise, sells or disposes of any product of such mine, quarry, mill, cannery, workshop, factory, or manu- facturing establishment at less than the fair market price obtainable therefor either (a) in such manner as directly or indirectly to benefit such person or any person directly or indirectly interested in the business of such person; or (b) with intent to cause such benefit; the gross amount received or accrued for such year or part thereof from the sale or dis- position of such product shall be taken to be the amount which would have been received or accrued from the sale or disposition of such product if sold at the fair market price. 184 Re VE N UE Act Certificates of age Federal board Penalty for false statement State certificates acceptable Mistakes of fact without intention to evade Returns Sec. 1203. (a) That no person subject to the provisions of this title shall be liable for the tax herein imposed if the only employment or permis- sion to work which but for this section would subject him to the tax, has been of a child as to whom such person has in good faith procured at the time of employing such child or permitting him to work, and has since in good faith relied upon and kept on file a certificate, issued in such form, under such conditions and by such persons as may be pre- scribed by a board consisting of the Secretary, the Commissioner, and the Secretary of Labor, showing the child to be of such age as not to subject such per- son to the tax imposed by this title. Any person who knowingly makes a false statement or presents false evidence in or in relation to any such certificate or application therefor shall be punished by a fine of not less than $100, nor more than $1,000, or by imprisonment for not more than three months, or by both such fine and imprisonment, in the discretion of the court. In any State designated by such board an em- ployment certificate or other similar paper as to the age of the child, issued under the laws of that State, and not inconsistent with the provisions of this title, shall have the same force and effect as a certificate herein provided for. (b) The tax imposed by this title shall not be imposed in the case of any person who proves to the satisfaction of the Secretary that the only employ- ment or peimission to work which but for this sec- tion would subject him to the tax, has been of a child employed or permitted to work under a mistake of fact as to the age of such child, and without inten- tion to evade the tax. Sec. 1204. That on or before the first day of the third month following the close of each taxable year, Emplotmbkt OF Child LABok 185 a true and accurate return under oath shall be made by each person subject to the provisions of this title to the collector for the district in which such person has his principal office or place of business, in such form as the Commissioner, with the approval of the Secretary, shall prescribe, setting forth specifically the gross amount of income received or accrued dm*- ing such year from the sale or disposition of the product of any mine, quarry, mill, cannery, work- shop, factory, or manufacturing estabhshment, in which children have been employed subjecting him to the tax imposed by this title, and from the total thereof deducting the aggregate items of allowance authorized by this title, and such other particulars as to the gross receipts and items of allowance as the w Commissioner, with the approval of the Secretary may require. Sec. 1205. That all such returns shall be trans- Assessment and mitted forthwith by the collector to the Commis- payment of tax sioner, who shall, as soon as practicable, assess the tax found due and notify the person making such return of the amount of tax for which such person is liable, and such person shall pay the tax to the collector on or before thirty days from the date of such notice. Sec. 1206. That for the purposes of this Act the inspection Commissioner, or any other person duly authorized by him, shall have authority to enter and inspect at any time any mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment. The Sec- retary of Labor, or any person duly authorized by him, shall, for the purpose of complying with a re- quest of the Commissioner to make such an inspec- tion, have like authority, and shall make report to the Commissioner of inspections made under such authority in such form as may be prescribed by the 186 Revenue Act Penalty Taxable year defined See page 8 Commissioner with the approval of the Secretary of the Treasury. Any person who refuses or obstructs entry or in- spe<3tion authorized by this section shall be punished by a fine of not more than $1,000, or by imprison- ment for not more than one year, or both such fine and imprisonment. Sec. 1207. That as used in this title the term "taxable year" shall have the same meaning as pro- vided for the purposes of income tax in section 200. The first taxable year for the purposes of this title shall be the period between sixty days after the pas- sage of this Act and December 31, 1919, both inclu- sive, or such portion of such period as is included within the fiscal year (as defined in section 200) of the taxpayer. TITLE XIII. General Administrative Provisions Sec. 1300. That hereafter the salary of the Com- Salary of missioner shall be $10,000 a year. The difference Commissioner between the amount appropriated under existing law and the salary herein established shall, for the period between the passage of this Act and July 1, 1919, be paid out of the appropriations for collect- ing internal revenue. Sec. 1301. (a) That hereafter there may be em- Deputy ployed in the Bureau of Internal Revenue, in lieu commissioners of the deputy commissioners whose salaries are now fixed by law, five deputy commissioners and an as- sistant to the Commissioner, who shall each receive a salary of $5,000 a year, payable monthly. The as- sistant to the Commissioner may be authorized by the Commissioner to perform any duties which the deputy conmiissioners may perform undei^ existing law. (b) The salaries of collectors may be readjusted Salaries of collectors and increased under such regulations as may be pre- scribed by the Commissioner, subject to the ap- proval of the Secretary, but no collector shall re- ceive a salary in excess of $6,000 a year. (c) There is hereby appropriated, out of any Appropriation for money in the Treasury not otherwise appropriated, expenses of collecting for the fiscal year ending June 30, 1919, the sum **^ of $7,500,000 for the expenses of assessing and col- lecting the internal-revenue taxes as provided in this Act, including the employment of necessary ' officers, attorneys, experts, agents, inspectors, 187 168 Revenue Act Advisory Tax Board Duration Vacancies Chairman Salary Duties deputy collectors, clerks, janitors, and messengers, in the District of Columbia and the several collec- tion districts, to be appointed as provided by law, telegraph and telephone service, rental and repair of quarters, postage, and the purchase of such sup- plies, equipment, furniture, mechanical devices, printing, stationery, law books and books of refer- ence, not to exceed $500 for street car fares in the District of Columbia, and such other articles as may be necessary for use in the District of Columbia and the several collection districts ; Provided, That not more than $2,750,000 of the total amount ap- propriated by this section may be expended in the Bureau of Internal Revenue, in the District of Columbia. (d) (1) There is hereby created a Board to be known as the "Advisory Tax Board," hereinafter called the Board, and to be composed of not to ex- ceed six members to be apointed by the Commis- sioner with the approval of the Secretary. The Board shall cease to exist at the expiration of two years after the passage of this Act, or at such earlier time as the Commissioner with the approval of the Secretary may designate. Vacancies in the membership of the Board shall be filled in the same manner as an original appoint- ment. Any member shall be subject to removal by the Commissioner with the approval of the Secre- tary. The Commissioner with the approval of the Secretary shall designate the chairman of the Board. Each member shall receive an annual salary of $9,000, payable monthly, together with actual necessary expenses when absent from the District of Columbia on official business. (2) The Commissioner may, and on the request of any taxpayer directly interested shall, submit to the Board any question relating to the interpreta- AdmikistrativeProvisiuxs 189 tion or administration of the income, war-profits or excess-profits tax laws, and the Board shall report its findings and recommendations to the Commis- sioner. (3) The Board shall have its office in the Bureau offkc of Internal Revenue in the District of Columbia. The expenses and salaries of members of the Board shall be audited, allowed, and paid out of appro- priations for collecting internal revenue, in the same manner as expenses and salaries of employees of the Bureau of Internal Revenue are audited, al- lowed, and paid. (4) The Board shall have the power to summon Powers witnesses, take testimony, administer oaths, and to require any person to produce books, papers, docu- ments, or other data relating to any matter under investigation by the Board. Any member of the Board may sign subpoenas and members and em- ployees of the Bureau of Internal Revenue desig- nated to assist the Board, when authorized by the Board, may administer oaths, examine witnesses, take testimony and receive evidence. Sec. 1302. That all internal-revenue agents and Leaves of absence inspectors shall be granted leave of absence with pay, which shall not be cumulative, not to exceed thirty days in any calendar year, under such regu- lations as the Commissioner, with the approval of the Secretary, may prescribe. Sec. 1303. (a) That there is hereby created a Legislative drafting Legislative Drafting Service under the direction of »ervice two draftsmen, one of whom shall be appointed by the President of the Senate, and one by the Speaker of the House of Representatives, without reference to political affiliations and solely on the ground of fitness to perform the duties of the office. Each draftsman shall receive a salary of $5,000 a year, payable monthly. The draftsmen shall, subject to 190 Revenue Act Duties of drafting service Appropriation for drafting service Imports of taxable goods from Virgin Islands the approval of the President of the Senate and the Speaker of the House of Representatives, employ and fix the compensation of such assistant drafts- men, clerks, and other employees, and purchase such furniture, office equipment, books, stationery, and other supplies, as may be necessary for the proper performance of the duties of the service and as may be appropriated for by Congress. (b) The Drafting Service shall aid in drafting public bills and resolutions or amendments thereto on the request of any committee of either House of Congress, but the Library Committee of the Senate and the Library Comimittee of the House of Repre- sentatives, respectively, may determine the prefer- ence, if any, to be given to such requests of the committees of either House, respectively. The draftsmen shall, from time to time, prescribe rules and regulations for the conduct of the work of the service for the committees of each House, subject to the approval of the Library Conmiittee of each House, respectively. (c) For the remainder of the current fiscal year there is hereby appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $25,000, or so much thereof as may be necessary, for the purpose of defraying the expenses of the establishment and maintenance of the service, in- cluding the payment of salaries herein authorized. One-half of all appropriations for the service shall be disbursed by the Secretary of the Senate and one- half by the Clerk of the House of Representatives. Sec. 1304. That there shall be levied, collected, and paid in the United States, upon articles coming into the United States from the Virgin Islands, a tax equal to the internal-revenue tax imposed in the United States upon like articles of domestic manu- facture; such articles shipped from such islands to Administrative Provisions 191 the United States shall be exempt from the pay- ment of any tax imposed by the internal-revenue laws of such islands; Provided, That there shall be Exports of taxable levied, collected and paid in such islands, upon ar- 8««<^* '/o™ u. s. tides imported from the United States, a tax equal *** "^^'" ' *" * to the internal-revenue tax imposed in such islands upon like articles there manufactured ; and such ar- ticles going into such islands from the United States shall be exempt from payment of any tax imposed by the internal-revenue laws of the United States. Sec. 1305. That all administrative, special, or Extension of existing stamp provisions of law, including the law relating ad»»"n««t''ative pro- .1 j.i?j. i? Tl.1 visions to this Ad to the assessment oi taxes, so tar as applicable, are hereby extended to and made a part of this Act, and every person liable to any tax imposed by this Act, or for the collection thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regulations as the Commissioner, with the approval of the Secre- tary, may from time to time prescribe. Whenever in the judgment of the Commissioner necessary he may require any person, by notice served upon him, to make a return or such state- ments as he deems sufficient to show whether or not such person is liable to tax. The Commissioner, for the purpose of ascertain- Commissioner may ing the correctness of any return or for the purpose ^^a*™"* ^^^* of making a return where none has been made, is hereby authorized, by any revenue agent or inspec- tor designated by him for that purpose, to examine any books, papers, records or memoranda bearing upon the matters required to be included in the re- turn, and may require the attendance of the person rendering the return or of any officer or employee of such person, or the attendance of any other per- ,., ii'.i • T .1 May take testimony son havmg knowledge m the premises, and may take ^^^ administer oaths his testimony with reference to the matter required 192 Revenue Act Floor taxes, returns Payment General administra- tive power of Commissioner Title XI made applicable Penalty for failure to make returns, give information, or collect and pay tax by law to be included in such return, with power to administer oaths to such person or persons. Sec. 1306. That where floor taxes are imposed by this Act in respect to articles or commodities, in respect to which the tax imposed by existing law has been paid, the person required by this Act to pay the tax shall, within thirty days after its passage, make return under oath in such form and under such regulations as the Commissioner, with the ap- proval of the Secretary, shall prescribe. Payment of the tax shown to be due may be extended to a date not exceeding seven months from the passage of this Act, upon the fihng of a bond for payment in such form and amount and with such sureties as the Commissioner, with the approval of the Secre- tary, may prescribe. Sec. 1307. That in all cases where the method of collecting the tax imposed by this Act is not spe- cifically provided in this Act, the tax shall be col- lected in such manner as the Commissioner, with the approval of the Secretary, may prescribe. All administrative and penalty provisions of Title XI of this Act, in so far as applicable, shall apply to the collection of any tax which the Commissioner determines or prescribes shall be paid by stamp. Sec. 1308. (a) That any person required under Titles V, VI, VII, VIII, IX, X, or XII, to pay, or to collect, account for and pay over any tax, or required by law or regulations made under authority thereof to make a return or supply any information for the purposes of the computation, assessment or collection of any such tax, who fails to pay, collect, or truly account for and pay over any such tax, make any such return or supply any such informa- tion at the time or times required by law or regula- tion shall in addition to other penalties provided by Admixistrative Provisions 193 law be subject to a penalty of not more than $1,000. (b) Any person who willfully refuses to pay, col- Penalty for winful lect, or truly account for and pay over any such tax, '*'""' *" '°**'® "" make such return or supply such information at the "™* **' ***^ " time or times required by law or regulation, or who willfully attempts in any manner to evade such tax shall be guilty of a misdemeanor and in addition to other penalties provided by law shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prose- cution. (c) Any person who willfully refuses to pay, col- Additional penalty lect, or truly account for and pay over any such tax ®' ^®"***® **** "^ shall in addition to other penalties provided by law be liable to a penalty of the amount of the tax evaded, or not paid, collected, or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected; Pro- vided, however. That no penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, or of sec- tion 605 or 620 of this Act, or for any offense for which a penalty has been recovered under section 3256 of the Revised Statutes. (d) The term "person" as used in this section in- Person defined eludes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to per- form the act in respect of which the violation occurs. Sec. 1309. That the Commissioner, with the ap- Reguiationa proval of the Secretary, is hereby authorized to make all needful rules and regulations for the en- forcement of the provisions of this Act. The Commissioner with such approval may by regulation provide that any return required by 194 Revenue Act witnesses Overpayments and overcollections Payment of tax where goods are sold on credit Acknowledgment of Titles V, VI, VII, VIII, IX OT X to be under oath certain returns before ^^y^ j£ ^.j^^ amouiit of the tax covercd thereby is not in excess of $10, be signed or acknowledged be- fore two witnesses instead of under oath. Sec. 1310. (a) That in the case of any overpay- ment or overcoUection of any tax imposed by sec- tion 628 or 630 or by Title V, Title VIII, or Title IX, the person making such overpayment or over- collection may take credit therefor against taxes due upon any monthly return, and shall make re- fund of any excessive amount collected by him upon proper application by the person entitled thereto. (b) Wherever in this Act a tax is required to be paid by the purchaser to the vendor at the time of a sale, and such sale is made on credit, then, under regulations prescribed by the Commissioner, with the approval of the Secretary, the tax may, at the option of the vendor, be returned and paid by him to the United States as if paid to him by the pur- chaser at the time of the sale, and in such case the vendor shall have a right of action in any court of competent jurisdiction against the purchaser for the amount of the tax so returned and paid to the United States. (c) Under such rules and regulations as the Commissioner with the approval of the Secretary may prescribe, the taxes imposed under the pro- visions of Titles VI, VII or IX shall not apply in respect to articles sold or leased for export and in due course so exported. Under such rules and regulations the amount of any internal-revenue tax erroneously or illegally collected in respect to ex- ported airticles may be refunded to the exporter of the article, instead of to the manufacturer, if the manufacturer waives any claim for the amount so to be refunded. Taxes on beverages and tobacco and excise taxes not to apply to goods exported AdmikistkativeProvi8ion8 195 Sec. 1311. That where the rate of tax imposed Use of stamps already by this Act, payable by stamps, is an increase over *" ^^^^ previously existing rates, stamps on hand in the col- lectors' offices and in the Bureau of Internal Reve- nue may continue to be used until the supply on hand is exhausted, but shall be sold and accounted for at the rates provided by this Act, and assess- ment shall be made against manufacturers and oth^ taxpayers having such stamps on hand on the day this Act takes effect for the difference between the amount paid for such stamps and the tax due at the rates provided by this Act. Sec. 1312. (1) That (a) if any person has prior Comracis preventing to May 9, 1917, made a bona fide contract with a ^^f {J^^V ri" m^^^ dealer for the sale or lease, after the tax takes ef- ^^^^ tTiviay" "917 feet, of any article in respect to which a tax is im- posed under Title VI, VII, or IX, or under sub- division 13 of Schedule A of Title XI, or under this subdivision, and (b) if such contract does not permit the adding of the whole of such tax to the amount to be paid under such contract, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of such tax as is not so permitted to be added to the contract price. If a contract of the character above described was made with any per- son other than a dealer, the tax collected under this Act shall be the tax in force on May 9, 1917. (2) If (a) any person has prior to September Contracts prior to 3, 1918, made a bona fide contract with a dealer for ^epteniber 3 1918 with regard to goods the sale or lease, after the tax takes effect, of any not then taxable article in respect to which a tax is imposed under Title VI, VII, or IX, or under subdivision 13 of Schedule A of Title XI, or under this subdivision, and in respect to which no corresponding tax was imposed by the Revenue Act of 1917, and (b) such contract does not permit the adding, to the amount to be paid under such contract, of the whole of the 196 Re VE N UE A CT Contracts prior to Sept. 3, 1918, with regard to goods then taxable. Payment and collec- tion of taxes in such cases See page 103 Dealer defined tax imposed by this Act, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of the tax imposed by this Act as is not so permitted to be added to the contract price. If a contract of the character above described was made with any per- son other than a dealer, no tax shall be collected under this Act. (3) If (a) any person has prior to September 3, 1918, made a bona fide contract with a dealer for the sale or lease, after the tax takes effect, of any article in respect to which a tax is imposed under Title VI, VII, or IX, or under subdivision 13 of Schedule A of Title XI, or under this subdivision, and in respect to which a corresponding tax was imposed by the Revenue Act of 1917, and (b) such contract does not permit the adding, to the amount to be paid under such contract, of the whole of the difference between such tax and the corresponding- tax imposed by the Revenue Act of 1917", then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of such difference as is not so permitted to be added to the contract price. If a contract of the character above described was made with any person other than a dealer, the tax collected under this Act shall be the tax in force on September 3, 1918. (4) The taxes payable by the vendee or lessee under this section shall be paid to the vendor or lessor at the time the sale or lease is consummated, and collected, returned, and paid to the United States by such vendor or lessor in the same manner as provided in section 502. (5) The term "dealer" as used in this section in- cludes a vendee who purchases any article with in- tent to use it in the manufacture or production of another article intended for sale. Admixistbative Provisions 197 (6) This section shall not apply to any tax im- posed by section 906. Sec. 1313. That in the payment of any tax un- Fractional part$ of der this Act not payable by stamp a fractional part ""t of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be in- creased to 1 cent. Sec. 1314. That collectors may receive, at par u«e of u. s. ceni- with an adjustment for accrued interest, certifi- ficates of indebtedness cates of indebtedness issued by the United States f "^ """^^'^ '^''^' . •' in payments and uncertified checks m payment of income, war- profits and excess-profits taxes and any other taxes payable other than by stamp, during such time and under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe; but if a check so received is not paid by the bank on which it is drawn the person by whom such check has been tendered shall remain liable for the pay- ment of the tax and for all legal penalties and ad- ditions the same as if such check had not been tendered. Sec. 1315. That section 3315 of the Revised Sec. 3315 u. s. R. s. Statutes, as amended, is hereby amended to read amended as follows: **Sec. 3315. The Commissioner of Internal Reve- Restamping of pack- nue may, under regulations prescribed by him with >««« the approval of the Secretary of the Treasury, issue stamps for restamping packages of distilled spirits, tobacco, cigars, snuff, cigarettes, fermented liquors, and wines which have been duly stamped but from which the stamps have been lost or destroyed by un- avoidable accident." Sec. 1316. (a) That section 3220 of the Revised Sec. 3320 u. s. R. s. Statutes is hereby amended to read as follows : amended "Sec. 3220. The Commissioner of Internal Reve- Refunds of taxes nue, subject to regulations prescribed by the Secre- tary of the Treasury, is authorized to remit, refund. 198 REVENUEAct and pay back all taxes erroneously or illegally as- sessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected ; also to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes collected by him, with the cost and expenses of suit ; also all dam- ages and costs recovered against any assessor, as- sistant assessor, collector, deputy collector, agent or inspector, in any suit brought against him by reason of anything done in the due performance of his official duty, and shall make report to Con- gress at the beginning of each regular session of Congress of all transactions under this section." Sec. 3225 u. s. R. s. (b) Scctiou 3225 of the Revised Statutes of the amended United Statcs is hereby amended to read as follows : Second assessments "Sec. 3225. Whcu a sccoud asscssmcut is made in case of any list, statement, or return, which in the opinion of the collector or deputy collector was false or fraudulent, or contained any understate- ment or undervaluation, such assessment shall not be remitted, nor shall taxes collected under such assessment be refunded, or paid back, or recovered by any suit, unless it is proved that such list, state- ment, or return was not willfully false or fraudu- lent and did not contain any willful understate- ment or undervaluation." Sec. 3689 u. s. R. s. (c) That the paragraph of section 3689 of the repealed in part Reviscd Statutes as amended, reading as follows: "Refunding taxes illegally collected (internal revenue) : To refund and pay back duties errone- ously or illegally assessed or collected under the internal-revenue laws," is repealed from and after June 30, 1920; and the Secretary of the Treasury shall submit for the fiscal year 1921, and annually Administrative Peovisions 199 thereafter, an estimate of appropriations to refund and pay back duties or taxes erroneously or illegally ^"J""** esumaie of assessed or collected under the internal-revenue laws, and to pay judgments, including interest and costs, rendered for taxes or penalties erroneously or illegally assessed or collected under the internal- revenue laws. Sec. 1317. That sections 3164, 3165, 3167, 3172, 3173, and 3176 of the Revised Statutes as amended u.s.R.s. amended are hereby amended to read as follows : "Sec. 3164. It shall be the duty of every col- - . , » • i .. .•''^ Lvidence of violations lector of mternal revenue havmg knowledge of any to be filed with district willful violation of any law of the United States attorney relating to the revenue, within thirty days after coming into possession of such knowledge, to file with the district attorney of the district in which any fine, penalty, or forfeiture may be incurred, a statement of all the facts and circimistances of the case within his knowledge, together with the names of the witnesses, setting forth the provisions of law believed to be so violated on which reliance may be had for condemnation or conviction. *'Sec. 3165. Every collector, deputy collector, Administration of internal-revenue agent, and internal-revenue oflB- oaths and securing cer assigned to duty under an internal-revenue of evidence agent, is authorized to administer oaths and to take evidence touching any part of the administration of the internal-revenue laws with which he is charged, or where such oaths and evidence are au- thorized by law or regulation authorized by law to be taken. "Sec. 3167. It shall be unlawful for any collec- information not to tor, deputy collector, agent, clerk, or other officer be revealed or employee of the United States to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer 2W) Retenue Act visited by him in the discharge of his official duties, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return, or to permit any income return or copy thereof or any book con- taining any abstract or particulars thereof to be seen or examined by any person except as pro- vided by law; and it shall be unlawful for any per- son to print or pubhsh in any manner whatever not provided by law any income return, or any part thereof or source of income, profits, losses, or ex- penditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceed- ing one year, or both, at the discretion of the court; and if the offender be an officer or employee of the United States he shall be dismissed from office or discharged from employment. invettigatioM "Sec. 3172. Evcry collector shall, from time to time, cause his deputies to proceed through every part of his district and inquire after and concern- ing all persons therein who are liable to pay any internal-revenue tax, and all persons owning or having the care and management of any objects liable to pay any tax, and to make a list of such persons and enumerate said objects. Returns, when re- "Sec. 3173. It shall bc the duty of any person, *»™'®** partnership, firm, association, or corporation, made liable to any duty, special tax, or other tax imposed by law, when not otherwise provided for, (1) in case of a special tax, on or before the thirty-first day of July in each year, and (2) in other cases before the day on which the taxes accrue, to make a list or return, verified by oath, to the collector or a deputy collector of the district where located, of the articles or objects, including the quantity of Admikibtrative Provisioks 201 goods, wares, and merchandise, made or sold and charged with a tax, the several rates and aggre- gate amount, according to the forms and regula- tions to be prescribed by the Commissioner of In- ternal Revenue, with the approval of the Secretary of the Treasury, for which such person, partner- ship, firm, association, or corporation is liable ; Pro- vided, That if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of property, goods, wares, and mer- chandise, article or objects Uable to pay any duty. When collector shall tax, or license, shall fail to make and exhibit a list "^^^ ^^*"" ^*"' . , taxpayer or return required by law, but shall consent to dis- close the particulars of any and all the property, goods, wares, and merchandise, articles, and objects Uable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it shall be the duty of the collector or deputy collector to make such list or return, which, being distinctly read, consented to, and signed and verified by oath by the person so own- ing, possessing, or having the care and management as aforesaid, may be received as the list of such per- son ; Provided further. That in case no annual list ^***'*^* ®' require- or return has been rendered by such person to the collector or deputy collector as required by law, and the person shall be absent from his or her residence or place of business at the time the collector or a deputy collector shall call for the annual list or re- turn, it shall be the duty of such collector or deputy collector to leave at such place of residence or busi- ness, with some one of suitable age and discretion, if such be present, otherwise to deposit in the near- est post office, a note or memorandum addressed to such person, requiring him or her to render to such collector or deputy collector the list or return required by law within ten days from the date of 202 RevenueAct such note or memorandum, verified by oath. And if any person, on being notified or required as afore- said, shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the collector, is erroneous, false, or fraudulent, or contains any un- dervaluation or understatement, or refuses to allow any regularly authorized Government officer to ex- . amine the books of such person, firm, or corpora- taxable persons tioi^j it shall be lawful for the collector to smnmon such person, or any other person having possession, custody, or care of books of account containing en- tries relating to the business of such person or any other person he may deem proper, to appear before him and produce such books at a time and place named in the summons, and to give testimony or answer interrogatories, under oath, respecting any objects or income liable to tax or the returns thereof. The collector may summon any person residing or found within the State or Territory in which his district lies ; and when the person intended to be summoned does not reside and can not be found within such State or Territory, he may en- ter any collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise ' all the authority which he might lawfully exercise in the district for which he was commissioned; Pro- vided, That 'person,' as used in this section, shall be construed to include any corporation, joint- stock company or association, or insurance company when such construction is necessary to carry out its provisions. Administrative Provisioxs 203 "Sec. 3176. If any person, corporation, com- when collector shall pany, or association fails to make and file a return "*''^ return from or list at the time prescribed by law or by regula- tion made under authority of law, or makes, will- fully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testi- mony or otherwise. In any such case the Commis- sioner may, from his own knowledge and from such information as he can obtain through testi- mony or otherwise, make a return or amend any re- turn made by a collector or deputy collector. Any return or list so made and subscribed by the Com- sioner, or by a collector or deputy collector and ap- proved by the Commissioner, shall be prima facie good and sufficient for all legal purposes. "If the failure to file a return or list is due to Extension of time for sickness or absence, the collector may allow such fi**"?"*®*"^" further time, not exceeding thirty days, for making and filing the return or list as he deems proper. "The Commissioner of Internal Revenue shall Commissioner to determine and assess all taxes, other than stamp "**" taxes, as to which returns or lists are so made un- der the provisions of this section. In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Com- Penalty for failure missioner of Internal Revenue or the collector in »« fi»« "»»""«" «»"• pursuance of law, the Commissioner of Internal Revenue shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or hst is willfully made, p^^^^^ ^^ ^^^^^^^ the Commissioner of Internal Revenue shall add lent returns to the tax 50 per centum of its amount. 204, Revenue Act Court of jurisdiction Collection of penalties "The amount SO added to any tax shall be col- lected at the same time and in the same manner and as part of the tax unless the tax has been paid be- fore the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." Sec. 1318. That if any person is summoned un- der this Act to appear, to testify, or to produce books, papers or other data, the district court of the United States for the district in which such person resides shall have jurisdiction by appropriate pro- cess to compel such attendance, testimony, or pro- duction of books, papers, or other data. The district courts of the United States at the in- stance of the United States are hereby invested with such jurisdiction to make and issue, both in actions at law and suits in equity, writs and orders of injunction, and of ne exeat republica, orders ap- pointing receivers, and such other orders and pro- cess, and to render such judgments and decrees, granting in proper cases both legal and equitable relief together, as may be necessary or appropriate for the enforcement of the provisions of this Act. The remedies hereby provided are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such provisions. Sec. 1319. That whoever in connection with the amount of tax included sale or Icasc, or off cr f Or salc or lease, of any arti- in price of goods ^|^^ ^^ ^^^ ^j^^ purposc of making such sale or lease, makes any statement, written or oral, ( 1 ) intended or calculated to lead any person to believe that any part of the price at which such article is sold or leased, or offered for sale or lease, consists of a tax imposed under the authority of the United States, or (2) ascribing a particular part of such price to a tax imposed under the authority of the United Misrepresentation of AOMIKISTRATIVE PROVI8Tt)N8 205 States, knowing that such statement is false or that the tax is not so great as the portion of such price ascribed to such tax, shall be guilty of a misde- meanor and upon conviction thereof shall be pun- Penalty ished by a fine of not more than $1,000 or by im- prisonment not exceeding one year, or both. Sec. 1320. That wherever by the laws of the Penal bond: United States or regulations made pursuant thereto, any person is required to furnish any re- cognizance, stipulation, bond, guaranty, or under- taking, hereinafter called "penal bond," with surety or sureties, such person may, in lieu of such surety or sureties, deposit as security with the official hav- ing authority to approve such penal bond. United Deposits of u. s States Liberty bonds or other bonds of the United bonds in lieu of States in a sum equal at their par value to the amount of such penal bond required to be fur- nished, together with an agreement authorizing such official to collect or sell such bonds so deposited in case of any default in the performance of any of the conditions or stipulations of such penal bond. The acceptance of such United States bonds in lieu of surety or sureties required by law shall have the same force and effect as individual or corporate sureties, or certified checks, bank drafts, post-office money orders, or cash, for the penalty or amount of such penal bond. The bonds deposited here- with whom u. s. under, and such other United States bonds as niay bonds may be be substituted therefor from time to time as such *^"*'' security, may be deposited with the Treasurer, or an Assistant Treasurer of the United States, a Government depository. Federal Reserve bank, or member bank, which shall issue receipt therefor, de- scribing such bonds so deposited. As soon as se- curity for the performance of such penal bond is no longer necessary, such bonds so deposited, shall R^ju^n of deposit be returned to the depositor; Provided, That in 206 Re VE X UE Act Inconsistent statutes modified Regulations case a person or persons supplying a contractor with labor or material as provided by the Act of Congress, approved February 24, 1905 (33 Stat., 811), entitled "An Act to amend an Act approved August thirteenth, eighteen hundred and ninety- four, entitled *An Act for the protection of persons furnishing materials and labor for the construction of public works,' " shall file with the obligee, at any time after a default in the performance of any con- tract subject to said Acts, the apphcation and affi- davit therein provided, the obligee shall not deliver to the obhgor the deposited bonds nor any surplus proceeds thereof until the expiration of the time limited by said Acts for the institution of suit by such person or persons, and, in case suit shall be in- stituted within such time, shall hold said bonds or proceeds subject to the order of the court having jurisdiction thereof; Provided further. That noth- ing herein contained shall affect or impair the priority of the claim of the United States against the bonds deposited or any right or remedy granted by said Acts or by this section to the United States for default upon any obhgation of said penal bond ; Provided further. That all laws inconsistent with this section are hereby so modified as to conform to the provisions hereof; And provided further. That nothing contained herein shall affect the authority of courts over the security, where such bonds are taken as security in judicial proceedings, or the au- thority of any administrative officer of the United States to receive United States bonds for security in cases authorized by existing laws. The Secretary may prescribe rules and regulations necessary and proper for carrying this section into effect. TITLE XIV. General Provisions Sec. 1400. (a) That the following parts of Acts Repealed provision*: are hereby repealed, subject to the limitations pro- vided in subdivision (b) : (1) The following titles of the Revenue Act of of Revenue Act 1916: ®fi9i6 Title I (called "Income Tax") ; Title II (caUed "Estate Tax") ; Title III (called "Munitions Manufacturers' Tax" ) , as amended ; Title IV (caUed "Miscellaneous Taxes"). (2) The following parts of the Act entitled "An Of Revenue Act Act to provide increased revenue to defray the ex- ®' ^"^^ ^* ^^^^ penses of the increased appropriations for the Army and Navy and the extensions of fortifications, and for other purposes," approved March 3, 1917: Title III (called "Estate Tax") ; Section 402 (called "Returns of Dividends"). (3) The following titles of the Revenue Act of of Revenue Act 1917: ^'^^^^ Title I (called "War Income Tax") ; Title II (called "War Excess-Profits Tax") ; Title III (called "War Tax on Beverages) ; Title IV (called "War Tax on Cigars, Tobacco, and Manufactures Thereof") ; Title V (called "War Tax on Facilities Fur- nished by Public Utilities, and Insurance") ; Title VI (called "War Excise Taxes") ; Title VII (called "War Tax on Admissions and Dues") ; Title VIII (called "War Stamp Taxes") ; 207 208 Re VEN UE A CT Provisions above repealed remain effective for taxes accrued under them Exceptions: (1) Income and war excess-profits tax (2) Estate taxes Taxes retained until corresponding tax takes effect 1916 income tax as amended effective in Porto Rico and Philippines Title IX (caUed "War Estate Tax") ; Title X (called "Administrative Provisions") ; Title XII (called "Income-Tax Amendments") . (b) Such parts of Acts shall remain in force for the assessment and collection of all taxes which have accrued thereunder, and for the imposition and collection of all penalties or forfeitures which have accrued and may accrue in relation to any such taxes, and except that the unexpended balance of any appropriation heretofore made and now avail- able for the administration of any such part of an Act shall be available for the administration of this Act or the corresponding provision thereof; Pro- vided, That, except as otherwise provided in this Act, no taxes shall be collected under Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917, or Title I or II of the Revenue Act of 1917, in respect to any period after December 31, 1917; Provided further. That the assessment and collection of all estate taxes, and the imposition and collection of all penalties or forfeitures, which have accrued under Title II of the Revenue Act of 1916 as amended by the Act entitled "An Act to provide increased revenue to defray the expenses of the increased appropriations for the Army and Navy and the extensions of fortifications, and for other purposes," approved March 3, 1917, or Title IX of the Revenue Act of 1917, shall be according to the provisions of Title IV of this Act. In the case of any tax imposed by any part of an Act herein re- pealed, if there is a tax imposed by this Act in lieu thereof, the provision imposing such tax shall re- main in force until the corresponding tax under this Act takes effect under the provisions of this Act. Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 shall remain in force for the assessment and collection of the income tax General Provisions 209 in Porto Rico and the Philippine Islands, except as may be otherwise provided by their respective legis- latures. Sec. 1401. That section 1100 of the Revenue Act Rate on first of 1917 is hereby repealed, to take effect on July '*"' ""* 1, 1919, and thereafter the rate of postage on all mail matter of the first class shall be the same as the rate in force on October 2, 1917; Provided, That letters wiitten and mailed by soldiers, sailors, and marines assigned to duty in a foreign country engaged in the present war may be mailed free of postage, subject to such rules and regulations as may be prescribed by the Postmaster General. Section 1107 of such Act is hereby repealed, to take effect July 11, 1919. Sec. 1402. That if any clause, sentence, para- invaKdity of any graph or part of this Act shall for any reason be section adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invahdate the remainder of this Act, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment has been rend- ered. Sec. 1403. That the Revenue Act of 1916 is Citation of Revenue hereby amended by adding at the end thereof a sec- tion to read as follows: "Sec. 903. That this Act may be cited as the 'Revenue Act of 1916.' " Sec. 1404. That the Revenue Act of 1917 is Citation of Revenue hereby amended by adding at the end thereof a A<^*®'^^^7 section to read as follows: "Sec. 1303. That this Act may be cited as the 'Revenue Act of 1917.' " Sec. 1405. That this Act may be cited as the Citation of Revenue "Revenue Act of 1918." ^'' ^^ ^^^^ 210 Revenue Act Bonus to persons discharged from mili- tary or naval service Exceptions When payable Sec. 1406. That all persons serving in the mili- tary or naval forces of the United States during the present war who have, since April 6, 1917, resigned or been discharged under honorable conditions (or, in the case of reservists, been placed on inactive duty), or who at any time hereafter (but not later than the termination of the current enlistment or term of service) in the case of the enlisted person- nel and female nurses, or within one year after the termination of the present war in the case of offi- cers, may resign or be discharged under honorable conditions (or, in the case of reservists, be placed on inactive duty)", shall be paid, in addition to all other amounts due them in pursuance of law, $60 each. This amount shall not be paid ( 1 ) to any person who though appointed or inducted into the military or naval forces on or prior to November 11, 1918, had not reported for duty at his station on or prior to such date; or (2) to any person who has already received one month's pay under the provisions of section 9 of the Act entitled "An Act to authorize the President to increase temporarily the military establishment of the United States," approved May 18, 1917; or (3) to any person who is entitled to retired pay; or (4) to the heirs or legal represen- tatives of any person entitled to any payment under this section who has died or may die before receiving such payment. In the case of any person who sub- sequent to separation from the service as above specified has been appointed or inducted into the military or naval forces of the United States and has been or is again separated from the service as above specified, only one payment of $60 shall be made. The above amount, in the case of separation from the service on or prior to the passage of this Act, shall be paid as soon as practicable after the General P&ovisioks 211 passage of this Act, and in the case of separation from the service after the passage of this Act shall be paid at the time of such separation. The amounts herein provided for shall be paid out of the appropriations for "Pay of the Army" and "Pay of the Navy," respectively, by such dis- bursing officers as may be designated by the Secre- tary of War and the Secretary of the Navy. The Secretary of War and the Secretary of the Regulations Navy, respectively, shall make all regulations necessary for the enforcement of the provisions of this section. Sec. 1407. That the provisions of section 5 of "Bone dry" the Act entitled "An Act making appropriations prohibition extended for the service of the Post Office Department for cdJ^u*" the fiscal year ending June 30, 1918, and for other purposes," approved March 3, 1917, relating to in- toxicating liquors in interstate commerce, as amended by section 1110 of an Act entitled "An Act to provide revenue to defray war expenses, and for other purposes," approved October 3, 1917, be, and the same are hereby, made applicable to the District of Columbia. Sec. 1408. That every person who on or after War contracts to be April 6, 1917, has entered into any contract, under- ^j""^ ^^^ Commis- taking, or agreement with the United States, or "**"*' * ^queste with any department, bureau, officer, commission, board, or agency under the United States or act- ing in its behalf, or with any other person having contract relations with the United States, for the performance of any work or the supplying of any materials or property for the use of or for the ac- count of the United States, shall, within thirty days after a request of the Commissioner therefor, file with the Commissioner a true and correct copy of every such contract, undertaking, or agreement. 212 Penalty Information to be available to Commissioner Effective date Revenue Act Whoever fails to comply with such request of the Commissioner shall be guilty of a misdemeanor and shall be punished by a fine of not more than $1,000, or by imprisonment for not more than one year, or both. The Commissioner shall (when not violative of the technical military or naval secrets of the Gov- ernment) have access to all information and data relating to any such contract, undertaking, or agreement, in the possession, control or custody of any department, bureau, board, agency, officer or commission of the United States and may call upon any such department, bureau, board, agency, offi- cer or commission for a full statement and descrip- tion of any allowance for amortization, obsoles- cence, depreciation or loss, or of any valuation, ap- praisal, adjustment or final settlement, made in pursuance of any such contract, undertaking, or agreement. Sec. 1409. That unless otherwise herein spe- cially provided, this Act shall take effect on the day following its passage. Approved, February 24, 1919 Appendix Computation Tables for Individual In- come Taxes C omputation Tables for Corporation Taxes Corporation Taxes: 1918 Corporation Taxes: 1919 Comparison of Taxes on Income from Corporations and Partnerships APPENDIX Computation Tables for Individual Income Taxes These tables provide a short method of determining the combined normal taxes and surtaxes falling on net incomes of individuals. They are based on fully taxable income and allow for the exemption of $2,000 from the normal tax which is accorded to married men or heads of families without dependents. The tables do not take into consideration income from tax-free securities or from dividends of corporations taxable on their net income. The rates for 1918 and for subsequent years differ only as to the normal tax. For 1918 this is 6 per cent, on the first $4,000 above the personal exemption and 12 per cent, on all income above this amount. For subsequent years these rates are 4 per cent, and 8 per cent, respectively. How to Use Tables. Find in column A the largest sum less than your total net income and multiply the difference between that sum and your actual income by the rate shown on the same line in col- umn F. Add the result to the sum given in column E. The result- ing sum constitutes the total income tax. Illustration. Take an income of $25,000 in 1918. In colunm E is given the amount of tax falling on an income of $24,000, namely, $3,490. The rate of 23 per cent., given on the same line in column F, is to be applied to the remaining $1,000 of income. The total tax on the $25,000 is therefore the sum of $3,490 and $230, or $3,720. If the income should be increased to $28,000 by the addition of $3,000 income from dividends and bond interest subject only to sur- taxes, the amount of surtax can readily be computed from column D. On the $1,000 of income falling between $24,000 and $26,000, the surtax rate of 11 per cent, applies, and on the remaining $2,000 the surtax rate of 12 per cent, applies. The additional tax is therefore $350 and the total tax upon the income of $28,000 is ^,070. 214 / Appe NDI X 215 TAX ON INCOME OF 1918 PAYABLE IN 1919 A B C D £ F Surtax Combined Amount of Net Income Normal Tax Surtax Rate on Next Increment Combined Normal and C^ A. Rate on Next Increment of Income Surtaxes of Income $2,000 $00 ^00 0% $00 6% 6,000 180 00 1 180 7 6,000 240 10 2 260 14 8,000 480 60 3 630 16 10,000 720 110 4 830 16 12,000 960 190 6 1,160 17 14,000 1,200 290 6 1,490 18 16,000 1,440 410 7 1,850 19 18,000 1,680 650 8 2,230 20 20,000 1,920 - 710 9 2,630 21 22,000 2,160 890 10 3,060 22 24,000 2,400 1,090 11 3,490 23 26,000 2,640 1,310 12 3,960 24 28,000 2,880 1,550 13 4,430 26 30,000 3,120 1,810 14 4,930 26 32,000 3,360 2,090 15 6,450 27 34,000 3,600 2,390 16 6,990 28 36,000 3,840 2,710 17 6,650 29 38,000 4,080 3,050 18 7,130 30 40,000 4,320 3,410 19 7,730 31 42,000 4,660 3,790 20 8,360 32 44,000 4,800 4,190 21 8,990 33 46,000 6,040 4,610 22 9,660 34 48,000 6,280 6,050 23 10,330 36 60,000 6,620 6,510 24 11,030 36 62,000 6,760 6,990 25 11,760 37 64,000 6,000 6,490 26 12,490 38 66,000 6,240 7,010 27 13,260 39 68,000 6,480 7,550 28 14,030 40 60,000 6,720 8,110 29 14,830 41 62,000 6,960 8,690 30 16,660 42 64,000 7,200 9,290 31 16,490 43 66,000 7,440 9,910 32 17,360 44 68,000 7,680 10,660 33 18,230 46 70,000 7,920 11,210 34 19,130 46 72,000 8,160 11,890 36 20,060 47 74,000 8,400 12,690 36 20,990 48 . 76,000 8,640 13,310 37 21,950 49 78,000 8,880 14,060 38 22,930 60 80,000 9,120 14,810 39 23,930 61 82,000 9360 15,690 40 24,960 62 84,000 9,600 16,390 41 25,990 63 86,000 9,840 17,210 42 27,050 64 88,000 10,080 18,050 43 28,130 66 90,000 10,320 18,910 44 29,230 56 92,000 10,660 19,790 45 30,350 67 94,000 10,800 20,690 46 31,490 68 96,000 11,040 21,610 47 32,650 69 98,000 11,280 22,560 48 33,830 60 100,000 11,520 23,610 62 35,030 64 160,000 17,520 49,510 56 67,030 68 200,000 23,520 77,510 60 101,030 72 300,000 35,520 137,510 63 173,030 75 600,000 69,520 263,510 64 323,030 76 1,000,000 119,620 683,610 66 703,030 77 6,000,000 599,520 3,183,510 66 3,783,030 77 216 R E VE N UE Act TAX ON INCOME OF 1919 PAYABLE IN 1920 A B C D E F Surtax Combined Rat« Combined Rate Amount of Net Income Normal Tax Surtax on Next Increment Normal and CI L on Next Increment of Income Surtaxes of Income $2,000 $00 $00 0% $000 4% 5,000 120« 00 1 120 6 6,000 160 10 2 170 10 8,000 320 60 3 370 11 10,000 480 110 4 690 12 12,000 640 190 5 830 13 14,000 800 290 6 1,090 14 16,000 960 410 7 1370 16 18,000 1,120 660 8 1,670 16 20,000 1,280 710 9 1,990 17 22,000 1,440 890 10 2,330 18 24,000 1,600 1,090 11 2,690 19 26,000 1,760 1,310 12 3,070 20 28,000 1,920 1,660 13 3,470 21 30,000 2,080 1,810 14 3,890 22 32,000 2,240 2,090 15 4,830 23 34,000 2,400 2,390 16 4,790 24 36,000 2,660 2,710 17 6,270 26 38,000 2,720 3,060 18 6,770 26 40,000 2,880 3,410 19 6,290 27 42,000 3,040 3,790 20 6,830 28 44,000 3,200 4,190 21 7,390 29 46,000 3,360 4,610 22 7,970 30 48,000 8,620 5,060 23 8,670 31 60,000 3,680 6,510 24 9,190 32 62,000 3,840 6,990 25 9,830 33 64,000 4,000 6,490 26 10,490 34 66,000 4,160 7,010 27 11,170 36 68,000 4,320 7,660 28 11,870 36 60,000 4,480 8,110 29 12,590 37 62,000 4,640 8,690 30 13,330 88 64,000 4,800 9,290 31 14,090 39 66,000 4,960 9,910 32 14,870 40 68,000 6,120 10,560 33 16,670 41 70,000 5,280 11,210 34 16,490 42 72,000 6,440 11,890 36 17,330 48 74,000 6,600 12,690 36 18,190 44 76,000 6,760 13,310 37 19,070 46 78,000 . 6,920 14,060 38 19,970 46 80,000 6,080 14,810 39 20,890 47 82,000 6,240 16,590 40 21,830 48 84,000 6,400 16,390 41 22,790 49 86,000 6,560 17,210 42 23,770 60 88,000 6,720 18,060 43 24,770 61 90,000 6,880 18,910 44 25,790 62 92,000 7,040 19,790 46 26,830 63 94,000 7,200 20,690 46 27,890 54 96,000 7,360 21,610 47 28,970 66 98,000 7,520 22,550 48 30,070 56 100,000 7,680 23,610 62 31,190 60 150,000 11,680 49,510 66 61,190 64 200,000 15,680 77,510 60 93,190 68 300,000 23,680 137,610 63 161,190 71 500,000 39,680 263,610 64 303,190 72 1,000,000 79,680 683,510 65 663,190 73 6,000,000 899,680 3,183,510 66 3,583,190 73 Computation Tables for Corporation Taxes CORPORATION TAXES: 1918 GROUP I. Corporations whose average prewar in- come exceeds 10% of present invested capital Case 1 Average prewar invested capital $30,000,000 Average prewar net income 3,800,000 Invested capital for 1918 36,000,000 Gross income, including taxable interest on Liberty bonds 65,000,000 Deductions 68,200,000 Net income 6,800,000 Wae-Peofits and Excess-Profits Tax First Bracket (30% of net income in ex- cess of excess-profits credit and not in excess of 20% of invested cap- ital) Income not over 20% of invested capital 6,800,000 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 2,800,000 2,803,000 Remainder $3,997,000 Tax at 30% $1,199,100 Second Bracket (65% of net income in ex- cess of 20% of invested capital) Income over 20% of invested capital . . 000 Tax at 65% 000 Third Bracket (the sum by which 80% of net income in excess of war-profits credit exceeds tax under first two brackets) Income 6,800,000 Deduct war-profits credit: Specific exemption $3,000 Average prewar income. 3,800,000 10% of increase in in- vested capital 500,000 4,303,000 Remainder $2,497,000 80% of $2,497,000 1,997,600 Deduct tax under first two brackets 1,199,100 Tax under third bracket 798,600 Total war-profits and excess-profits tax $1,997,600 Note. — The total tax so computed is simply an 80% war-profits tax. The third bracket is in reality only a device for applying an alternative tax under another name. The corporation must pay whichever tax is the higher — war-profits or excess-profits. 217 218 Revenue Act Corporation Income Tax Income $6,800,000 Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 1,997,600 Liberty bond interest... 66,300 2,065,900 Remainder t $4,734,100 Tax at 12% $568,092 Add war-profits and excess-profits tax 1,997,600 Total taxes on corporation income $2,665,692 Case 2 Average prewar invested capital $3,000,000 Average prewar net income 550,000 Invested capital for 1918 3,500,000 Gross income, including taxable interest on Liberty bonds 6,250,000 Deductions 5,500,000 Net income 760,000 War-Profits and Excess-Profits Tax First Bracket Income not over 20% of invested capital $700,000 Deduct excess-profits credit: Specific exemption $3,000 Yo of invested capital.. 280,000 283,000 Remainder $417,000 Tax at 30% $126,100 Second Bracket Income over 20% of invested capital. . 50,000 Tax at 66% 32,500 Total tax under first two brackets $157,600 Third Bracket Income 750,000 Deduct war-profits credit: Specific exemption $3,000 Average prewar income. 560,000 10% of increase in in- vested capital 60,000 603,000 Remainder $147,000 80% of $147,000 117,600 Tax under first two brackets 167,600 Tax imder third bracket 000 Total war-profits and excess-profits tax $167,600 Note. — In most cases corporations whose earnings bring them within the terms of the second bracket are also subject to the tax imposed by the third bracket. Where prewar earnings and the increase in invested capital were relatively large, the excess-profits tax imposed by the first two brackets may exceed the sum com- puted at 80% under the third bracket, as in this case. A p p E X D I X 219 CoBiPOEATiON Income Tax Income $750,000 Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 157,600 Liberty bond interest... 6,950 165,550 Remainder $584,450 Tax at 12% $70,134 Add war-profits and excess-profits tax 157,600 Total taxes on corporation income . . $227,734 GROUP II. Corporations whose average prewar in- come plus or minus 10% of the change in in- vested capital is not in excess of 10% of present invested capital (In these cases prewar income and capital do not affect the amount of the war-profits credit.) Case 3 Invested capital for 1918 $1,000,000 Gross income 420,000 Deductions 310,000 Net income 110,000 War-Profits and Excess-Profits Tax First Bracket Income not over 20% of invested capital 110,000 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 80,000 83,000 Remainder $27,000 Tax at 30% $8,100 Second Bracket Income over 20% of invested capital. . . 000 Tax at 65% 000 Third Bracket Income 110,000 Deduct war-profits credit: Specific exemption 3,000 10% of invested capital. 100,000 103,000 Remainder $7,000 80% of $7,000 6,600 Tax under first two brackets 8,100 Tax under third bracket 000 Total war-profits and excess-profits tax $8,100 220 Revekue Act Corporation Income Tax Income 110,000 Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 8,100 10,100 Remainder * $99,900 Tax at 12% 11,988 Add war-profits and excess-profits tax. . 8,100 Total taxes on corporation income .... $20,088 Case 4 Invested capital for 1918 $1,000,000 Gross income 1,850,000 Deductions 1,600,000 Net income 250,000 Wab-Profits and Excess- Profits Tax First Bracket Income not over 20% of invested capital 200,000 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 80,000 83,000 Remainder $117,000 Tax at 30% $35,100 Second Bracket Income over 20% of invested capital . . 60,000 Tax at 65% 32,500 Total tax under first two brackets $67,600 Third Bracket Income 250,000 Deduct war-profits credit: Specific exemption $3,000 10% of invested capital.. 100,000 103,000 Remainder $147,000 80% of $147,000 117,600 Deduct tax under first two brackets... 67,600 Tax under third bracket 60,000 Total war-profits and excess-profits tax $117,600 Note. — This total tax is simply the 80% war-profits tax. The law so works out that the 80% rate applies to corporations in this group whose invested capital is $375,000 or over whenever earnings for 1918 rise above 12% of invested capital. Since the 65% rate applies only to income in excess of 20% of invested capital, it follows that corporations of this class are in practice never subject to the tax in the second bracket. Appendix 221 Corporation Income Tax Income $260,000 Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 117,600 119,600 Remainder $130,400 Tax at 12% 15,648 Add war-profits and excess-profits tax 117,600 Total taxes on corporation income.... $133,248 GROUP III. Small Corporations Case 5 Average prewar invested capital $20,000 Average prewar net income 2,400 Invested capital for 1918 24,000 Gross income 115,000 Deductions 106,000 Net income 9,000 War-Profits and Excess-Profits Tax First Bracket Income not over 20% of invested capital 4,800 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 1,920 4,920 Excess of deduction to apply under second bracket 120 Tax under first bracket 000 Second Bracket Income over 20% of invested capital.. 4,200 Deduct excess deduction from first bracket 120 Remainder $4,080 Tax at 65% 2,662.00 Third Bracket Income 9,000 Deduct war-profits credit: Specific exemption 3,000 Average prewar income, 2,400 10% of increase in in- vested capital 400 6,800 Remainder 3,200 80% of $3,200 2,660 Tax under first two brackets 2,652 Tax under third bracket 000.00 Total war-profits and excess-profits tax $2,662.00 222 Revenue Act Corporation Income Tax Income Deduct credits: Specific exemption War-profits and excess- profits tax 2,000 2,652 Remainder ^ . . . . , Tax at 12% Add war-profits and excess-profits tax. Total tax on corporation income 9,000 4,662 $4,348 621.76 2,662.00 $3,173.76 Case 6 Average prewar invested capital. Average prewar net income Invested capital for 1918 Gross income Deductions Net income , $50,000 10,500 60,000 210,000 185,000 25,000 War-Profits and Excess-Profits Tax First Bracket Income not over 20% of invested capital $12,000 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 4,800 7,800 Remainder $4,200 Tax at 30% Second Bracket Income over 20% of invested capital... 13,000 Tax at 65% Tax under first two brackets Third Bracket Income 25,000 Deduct war-profits credit: Specific exemption 3,000 Average prewar income. 10,600 10% of increase in in- vested capital 1,000 14,600 Remainder $10,600 80% of $10,500 8,400 Tax under first two brackets 9,710 Tax under third bracket Total tax under the three brackets $1,260 8,450 $9,710 000 $9,710 Appendix 223 Limitation of AMorrxT of Tax Section 302 provides that the tax shall in no case exceed 30% of net income in excess of $3,000 and not in excess of $20,000, plus 80% of the net income in excess of $20,000. Income not over $20,000 $20,000 Deduct specific amount 3,000 Remainder $17,000 Tax at 30% $5,100 Income over $20,000 $5,000 Tax at 80% 4,000 Total tax as limited $9,100 Total war-profits and excess-profits tax... 9,100 Corporation Income Tax Income 25,000 ' Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 9,100 11,100 Remainder $13,900 Tax at 12% 1,668 Total taxes on corporation income $10,768 CORPORATION TAXES: 1919 Case 7 Invested capital for 1919 $35,000,000 Gross income 65,000,000 Deductions 58,200,000 Net income 6,800,000 War-Profits and Excess-Profits Tax First Bracket Income not over 20% of invested capital 6,800,000 Deduct excess-profits credit: Specific exemption $3,000 8% of invested capital.. 2,800,000 2,803,000 Remainder 3,997,000 Tax at 20% $799,400 Second Bracket Income over 20% of invested capital., 000 Tax at 40% 000 Total war-profits a,"^^ excess-profits tax $799,400 224 Revenue Act CottPORATioiir Income Tax Inccine $6,800,000 Deduct credits: Specific exemption 2,000 War-profits and excess- profits tax 799,400 Liberty bond interest in- cluded in gross income 66,300 867,700 Remainder $5,932,300 Tax at 10% 693,230 Add war-profits and excess-profits tax. 799,400 Total taxes on corporation income $1,392,630 Case 8 Invested capital for 1919 $3,500,000 Gross income 6,250,000 Deductions 6,600,000 Net income 750,000 Wak-Profits and Excess-Pbofits Tax First Bracket Income not over 20% of invested capital $700,000 Deduct excess-profits credit: Specific exemption $3,000 Yo of invested capital.. 280,000 283,000 Remainder $417,000 Tax at 20% $83,400 Second Bracket Income over 20% of invested capital. . 50,000 Tax at 40% 20,000 Total war-profits and excess-profits tax $103,400 Cooporation Incobie Tax Income 760,000 Deduct credits: Specific exemption $2,000 War-profits and excess- profits tax 103,400 Liberty bond interest in- cluded in gross income 5,950 111,350 Remainder $638,650 Tax at 10% 63,865 Total taxes on corporation income $167,265 Comparison of Taxes on Income from Corporations and Partnerships Partners are taxed on their share of partnership earnings, whether distributed or not. Stockholders of corporations are taxable only on distributed earnings unless it should appear to the Commissioner that earnings are being held in a business merely to avoid the surtaxes. In the following comparison of 1918 taxes, it is assumed that the corporation's entire net income remaining after the payment of taxes is distributed and therefore subject to surtaxes in the hands of the shareholders. It is further assumed that the business is owned equally by four shareholders or partners, whose sole income is derived from the business. The capital stock tax on corporations is not taken into consideration. CASE 9. Invested capital and income as in Case 1. Taxes on Income fhom Corporation Net income $6,800,000.00 Total taxes on corporation income (from Case 1) 2,565,692.00 Net income after payment of taxes 4,234,308.00 Share of each four stockholders, if distributed 1,058,577.00 Individual surtaxes on $1,058,577 621,686.06 Aggregate surtaxes on four stockholders, if all earn- ings are distributed 2,486,34050 Add taxes on corporation 2,665,692.00 Aggregate taxes on income from corporation 6,052,032.20 Percentage ratio of aggregate tax to corporation's net income if all earnings are distributed 74.3% Percentage ratio of tax to corporation's net income if no earnings are distributed 37.78% Taxes on Income from Partnership Net income $6,800,000.00 Share of each four partners 1,700,000.00 Total income tax on $1,700,000 1,242,030.00 Aggregate tax on four partners 4,968,120.00 Percentage ratio of aggregate tax to income from partnership 73.06% 225 226 Revenue Act CASE 10. Invested capital and income as in Case 4. Taxes on Income from Corporation Net income $250,000.00 Total taxes on corporation income 133^48.00 Net income after payment of taxes $116,762.00 Share of each four stockholders, if distributed 29,188.00 Individual surtaxes on $29,188 1,704.44 Aggregate surtaxes on four stockholders, if all earn- ings are distributed 6,817.76 Add taxes on corporation 133,248.00 Aggregate taxes on income from corporation $140,065.76 Percentage ratio of aggregate tax to corporation's net income if all earnings are distributed 56.03% Percentage ratio of tax to corporation's net income if no earnings are distributed 53.3% Taxes on Income from Partnership Net income $250,000.00 Share of each of four partners 62,500.00 Total income tax on $62,500 15,860.00 Aggregate tax on four partners 63,440.00 Percentage ratio of aggregate tax to income from partnership 25.38% INDEX Page Accounting for income tax.. 20 Additional or surtax rates.. 16-19 Administrative provisions: .. 187 Collector's duties 199 Income tax, payment of . . . 57 Individuals' duties 200 Information not made pub- lic 199 Receipts for taxes 62 Admissible assets defined... 77 Admissions tax : 141 Admission defined 143 Cabarets 142 Exemptions 143 Free admissions 141 Penalties 143 Advisory tax board 188 Alcohol (see Distilled Spirits) 110 Aliens (see Non-resident Aliens) 30 Ammunition, etc 146 Amusement places 167 Appropriations 187 Art products 148 Assessments 203 Assistant to Commissioner . . 187 Auto accessories 145 Automobiles and auto trucks 145 Automobiles, passenger, rent- ed for hire 158 Beverages : 107 Beer 116 Brandy 118, 128 Champagne 119 Distilled spirits 107, 116 Gin 113, 129 Near-beer 130 Soda fountains 131 Soft drinks 131 Waters 131 Wines 117-126 Basis for determining gain or loss 11 Boats, pleasure: Purchase of 147 Use of 160 Bonds, indemnity and surety 174 Bonds of indebtedness 174 Bonds of U. S. as surety... 205 Page Borrowed capital: 77 Definition of 77 Not included in invested capital 79 Bowling alleys and billiard rooms 158 Brandy (see Distilled Spirits) 118, 128 Brewers and liquor dealers.. 158 Brokers: Returns for income tax... 64 Special tax 155 Cabaret, admissions 142 Cable messages 100 Cameras 146 Candy 146 Capital stock, stamp tax on issue or sale of 175 Capital stock tax (see Special Taxes) 154 Carpets 149 Casualty insurance 105 Certificates of indebtedness, use of to pay taxes . . 197 Checks in payment of taxes . . 197 Chewing gum 146 Child labor, tax on employ- ment of 182-186 Cigar and cigarette holders. . 146 Cigar and cigarette manufac- turers 159-160 Cigarettes (see Tobacco). 133, 134 Cigarette packages 134 Cigarette papers 136 Cigars (see Tobacco) 133 Circuses 157 Citation titles 209 Citizens of U. S. possessions 67 Claims (see Refunds) 197 Collection of foreign items, license for 67 Commissioner of Internal Revenue: 6 Powers of 191 Returns made by 203 Salary of 187 Commutation tickets 100 Concert halls 156 Consolidated corporate in- come tax returns . . 55-57 227 228 Revenue Act Page Consolidations, war-excess profits tax on 82-84 Contracts affected by taxes. . 195 Contributions or gifts 27 Conveyances 179 Co-operative societies 445 Cordials (see Distilled Spirits) 114 Corporations : Capital stock tax on (see Special Taxes) 154 Income tax on (see Income Tax, Corporations) . 43 Personal service, defined ... 8 War-profits and excess- profits tax (see War- profits and Excess- profits Tax) 69 Cosmetics 1^2 Courts, jurisdiction of 204 Credits allowed for income tax: Corporations 52 Individuals 29 Non-resident aliens 30 Taxes paid 38, 63 Credits allowed for war-ex- cess-profits tax: Excess-profits credit 75 War-profits credit 74 Customshouse brokers 166 Dealers in drugs 162 Debts, worthless, deduction of 25, 48 Deductions allowed for in- come tax: Corporations 46-52 Individuals 24-28 Non-resident aliens 28, 30 Definitions: Admissible assets 77 Admissions 143 Borrowed capital 77 Collector 6, 87 Commissioner 6 Corporation 6 Dividend 9, 69 Domestic 6 Executor 87 Fiduciary 8 Fiscal year 8, 69 Foreign 6 Government contract 6 Gross income 20-23, 46 Inadnussible assets 77 Intangible property 77 Invested capital 78 Page Definitions — continued Military or naval forces of U. S 7 Net income 20, 45 Net losses 12 Paid and paid or accrued 9 Person 6 Personal service corpora- tion 8 Present war 7 Prewar period 73 Revenue Act of 1916 6 Revenue Act of 1917 6 Secretary 6 Tangible property 77 Tfixable year 8, 69 Taxpayer 6 Termination of war 7 United States 6 Withholding agent 8 Dependents, income tax ex- emption for 30 Depletion of mineral re- sources or timber 26, 40 Depreciation and obsolesc- ence 25, 48 Deputy commissioners 187 Distilled spirits: 107 Alcohol Ill Beverages 107 Brandy 118, 128 Cordials 114 Fermented liquor 116 Floor taxes 113, 119 Gin 113, 129 Imports 110 Penalties 115, 126, 129 Perfumes 109 Prohibition, period of . . . 107 Rectifiers 113 Registered distilleries 110 Regulation of distilleries.. 116 Stamps 115 Surveys 127 Wine-production regula- tions ...121, 125-126, 128 Wines 117, 124 Withdrawals, free of tax . . 127 Distribution of profits, when taxable 9 Dividends: 9-10 Deemed to be paid out of taxable earnings .... 9 Defined 9 Distribution, as of what year's earnings 10 Liqiddation 10 Return of payments 64 Index 229 Paok Dividends — continued Stock dividends taxable... 10 Drafting service, legislative. .189 Drafts or checks, time 178 Dues and membership fees . . 143 EflFective date 212 Electric fans 146 Entries of goods at Customs House 179 Estates and trusts, income tax on (see Income Tax) 32-34, 40 Estate tax: Definitions: 87 Collector 87 Executor 87 Exemption of estates of persons dying in mil- itary or naval ser- vice 89 Gross estate, value of 89 Net estate, value of: Non-residents 92 Residents 90, 92 Notice by executor 93 Payment of tax: 96-98 Default 96 Receipts 95 Tax a lien for 10 years. . 97 When tax is due 94 Penalties 98 Rates 87 Returns: 94 By collector 94 Transfers or trusts in con- templation of death. 97 Excess-profits tax (see War- profits and Excess- profits Tax) 69 Exchanges of property, pro- fits from 11 Excise taxes : 145 Ammunition, etc 146 Art products 148 Auto accessories 145 Automobiles and auto trucks 145 Boats, pleasure 147 Cameras 146 Candy 146 Carpets, etc 149 Chewing gum 146 Cigar and cigarette holders 146 Cosmetics 152 Daggers, etc 146 Electric Fans 146 Fans 149 Firearms, etc 146 Paob Excise taxes — continued Fur products 147 Hats and caps 149 Hosiery 150 Jewelry 150 Kimonos, etc 150 Knives, etc 146 Lighting fixtures 149 Liveries 147 Medicinal preparations . . . 162 Motion picture film . . . 147, 161 Motorcycles 146 Musical instruments 146 Neckwear 149 Patent medicines 152 Perfumes 162 Photographic materials . . . 146 Picture frames 149 Pipes 146 Purses, etc 149 Shirts 150 Shoes, etc 149 Slot machines 146 Smoking jackets, etc 149 Sporting goods 146 Sporting habits 147 Thermos bottles 146 Toilet articles 162 Toilet soaps 147 Trunks 149 Umbrellas 149 Underclothing, etc 160 Valises, etc 149 Waistcoats 149 Exhibitions and shows 167 Expenses, business 24, 46 Exports, exemption from tax 194 Express transportation .... 99 Extension of time for filing returns 203 False and fraudulent returns 69 Fermented liquor (see Dis- tilled Spirits) 116 Films, motion picture. . .147, 151 Fiduciary: Defined 8 Returns 40 Fire insurance 106 Fiscal year: 13-16 Defined 8 Partnerships 31 Floor taxes, returns 192 Foreign corporations: Deductions 52 Exemptions 75 Withholding at source .... 63 230 Revenue Act Page Foreign governments, ex- emption of income of 22 Foreign items, license for collection of 67 Gain or loss for income tax, basis for determin- ing 11 Gifts and bequests, etc., ex- empt from income tax 21 Gifts and contributions, charitable, etc. ...27, 33 Gin (see Distilled Spirits) 113, 129 Gold, exemption of income derived from mining 73 Government contract defined 6 Gross income: Corporations 46 Individuals 20 Harrison Narcotic Law, amended 162-168 Ice cream 131 Inadmissible assets, deduc- tion of, from invest- ed capital 79 Defined 77 Income tax: Accounting methods and periods 20 Administrative provisions. 67 Amortization 25, 48 Basis for determining gain or loss 11 Bequests 21 Citizens of U. S. possess- ions 67 Collection of foreign items 67 Collection of tax at source 36, 53 Concealment of property, fraudulent 60 Contributions or gifts 27, 33 Corporations; Affiliated 55 Conditional and other exemptions 44 Consolidated returns 55 Credits allowed 52, 53 Deductions allowed 46, 52 Exempt 44 Exempt income 46 Foreign corporation ... 52, 53 Gross income defined 46 Insurance companies. .46, 49 Page Income tax — continued Corporations — continued Items not deductible ... 62 Net income defined 46 Personal service corpo- rations : 8 Exempted as such .... 45 Taxed as partnerships 32 Profits taxable to stock- holders 35 Railroads under Federal control 43 Rates for 1918 and suc- ceeding years 43 Returns, basis 54 Time and place for filing 57 Withholding at source.. 63 Credits allowed: Corporations 52 Individuals 29 Non-resident aliens 30 Partnerships 31 Credit for taxes: Corporations 63 Individuals 38 Dealings in property 11 Debts, bad 25, 48 Deductions : Corporations 46-52 Estates and trusts 33 Individuals and partner- ships 24-29 Insurance companies . . . Net losses 12 Definitions: Dividends 9 Fiduciary 8 Fiscal year 8 Gross income 20-23 Net income 20 Paid or accrued 9 Personal service corpo- ration 8 Taxable year 8 Withholding agent 8 Dependents, exemption for 30 Depletion 26, 49 Depreciation and obsoles- cence 25, 48 Dividends: Defined 9 Distribution out of what year's earnings 10 Exempt from: Corporation income tax 48 Individual normal tax 29 Index 231 Page Income tax — continued Dividends — continued Liquidation 10 Paid out of taxable earnings 9 Personal service corpo- ration 48 Return of payments 64 Stock dividends are tax- able 10 Estates and trusts: 32-34 Credits allowed benefici- ary 34 Deductions of contribu- tions, etc 33 Fiduciary returns 40 Taxable income 32 Where beneficiary must pay tax 34 Where fiduciary must pay tax 33 Fiduciaries: Defined 8 Duties of 33 Returns 40 First taxable year 8 Fiscal year: Defined 8 Different tax rates IS, 31 Foreign items, license for collection of 67 Foreign governments, in- come of exempt 22 Gain or loss, basis for de- termining 11 Gifts 21 Gross income 20, 46 Holding companies 35 Individuals: Accounting methods and periods 20 Credit for taxes 38 Credits allowed 29 Deductions allowed .. . .24-29 Gross income 20 Income exempt from tax 21-23 Items not deductible ... 29 Mines and wells, limita- tion of tax on in- come from sale of.. 19 Net income defined 20 Non-resident aliens: 30 Deductions allowed ... 28 Exempt income 30 Personal exemption ... 29 Withholding at source 36 Normal tax for 1918 16 Page Income tax — continued Individuals — continued Normal tax for subse- quent years 16 Payment of tax at source: Non-resident aliens ... 36 "Tax-free covenant** bond interest 36 Profits of corporations taxable to stockhold- ers 35 Returns 39, 41, 42 Surtax rates 16-20 Understatements on re- turns 42 Information at source.... 64 Installment tax payments. 57 Insurance companies 46, 49 Interest: Deductible 24, 47 Federal Farm Loan bonds 21 Paid on indebtedness 24, 47 State and municipal ob- ligations 22 U. S. obligations. . .22, 29, 52 Inventories 12 Items exempt from tax. . .21-23 Items not deductible: Corporations 52 Individuals 29 Liquidation dividends 10 Losses : Basis of computing .... 11 Corporations 48, 51 Individuals 26,27 Net 12 Mines and wells 19, 26, 49 Net income defined 20 Net losses, deduction of . . . 12 Non-resident aliens: Credits 30 Deductions 28 Exempt income 23 Gross income defined ... 23 Personal exemption 30 Withholding at source... 36 Normal tax on individuals 15 Oil and gas wells 19, 26, 49 Paid or accrued defined. . . 9 Partnerships: 31 Credits allowed members 31 Fiscal year 31 Members taxed as indi- viduals 31 Net income 32 Returns 40 232 Revenue Act Page Income tax — continued Parts of income subject to rates for different years 16 Payment of tax 67-62 Payment of tax at source: 36-38 Non-resident aliens 36 "Tax-free covenant" bond interest 36 Penalties 63 Personal exemption 29 Personal service corpora- tion: Defined 8 Exempt as such 46 Taxed in same manner as partnership 32 Porto Rico and Philippine Islands 67 Profits of corporations tax- able to stockholders 36 Property, gain or loss from exchanges of 11 Publication of statistics ... 66 Rates of tax: Corporation income 43 Fiscal year with diflPer- ent rates 15 Normal 16 Surtax 16-19 Receipts for taxes 62 Refunds 62, 197 Returns : Accounting period changed 41 Broker's 64 Consolidated 65-67 Corporation 64 Extension of time to file 42 Fiduciary 40 Individual 39 Information at source. . . 64 Inspection of 66 Partnership 40 Payments of dividends.. 64 Public records 65 Time and place for fil- ing 42, 67 Understatements 42 Statistics, publication of.. 66 Stock dividends, taxable. . 10 Surtax on individuals... .16-19 Taxable year defined 8 Taxes, credit for 38, 63 Page Income tax — continued Tax-free covenant bond in- terest 36, 63 Undistributed profits, tax- able to stockholders 35 Withholding agent defined 8 Withholding at source: Foreign corporations ... 63 Non-resident aliens .... 36 Tax-free covenant bond interest 36, 53 Individuals, income tax on (see Income Tax)... 15 Information at source 64 Inheritance tax (see Estate Tax) 87 Installment tax payments ... 57 Insurance policies, tax on: Casualty 105 Exemptions 106 Fidelity or guaranty 174 Life 104 Marine, inland, and fire.. . . 105 Payment 106 Returns 106 Stamp tax on 174 Intangible property defined . . 77 Interest : Exempt from income tax. 21, 46 Paid, deduction of 24, 47 Inventories 12 Invested capital (see War- profits and Excess- profits Tax) 77 Items exempt from income tax 21-23 Items not deductible for in- come tax: Corporations 52 Individuals 29 Jewelry 150 Judgments, payment of 199 Jurisdiction of courts 204 Leaf tobacco, dealers in.. 137-140 Leased wire service 101 License for collection of for- eign items 67 Life insurance: Policies, proceeds exempt from income tax 21 Premiums, return, exempt from income tax. ... 21 Premiums not deductible for income tax.... 29, 52 Tax on 104 Liquidation dividends 10 IXDEX 233 Paos Losses ; Basis for determining 11 Deduction of .25, 48 Due to shrinkage of in- ventory value 27, 51 Net loss, deduction of 12 Marine, inland, and fire in- surance 106 Marine insurance companies, deductions 60 Medicines 162 Mileage books 101 Mines, oil and gas wells: Deduction for depletion. .26, 49 Income tax on profits from sale of 19 War-profits and excess- profits tax on profits from sale of 86 Motion picture films 147, 151 Mutual insurance companies, deductions 60 Narcotic Act amended. . .162-166 Near-beer (see Beverages) . . 130 Net income: Corporations 45 Individuals 20 War-profits and excess- profits tax 76 Net losses, deduction for in- come tax 12 Non-resident aliens: Credits and deductions al- lowed 28 Gross income 23 Personal exemption 30 Normal income tax on indi- viduals 16 Obsolescence 25 Oil and gas wells: Deductions for depletion.. 26, 49 Income tax on profits from sale of 19 War-profits and excess- profits tax on pro- fits from sale of 86 "Paid" and "Paid or accrued" defined 9 Parcels post 180 Parlor-car service 100 Partnerships : Income tax on (see In- come Tax) 31 Page Partnerships — continued War-profits and excess- profits tax paid .... 86 When taxed as corpora- tion 82-84 Passage tickets 179 Pawnbrokers 156 Payments: By check or U. S. certifi- cates of indebted- ness 197 Income tax 67 Income tax at source: Foreign corporations.. 63 Non-resident aliens ... 36 "Tax-free covenant" bond interest 36 War-profits and excess- profits tax 86 Penalties : Admissions and dues 143 Excise taxes 148, 161 False and fraudulent in- come tax returns ... 63 Fraud or misrepresenta- tion 204 Furnishing information . . 199 General provisions . . . 192, 203-4 Income tax 63 Transportation 104 Refundable 197 Special taxes 162 Stamp taxes 171 Perfumes 109, 162 Personal exemption: Individuals 29 Non-resident aliens SO Personal service corpora- tions : Defined 8 Exempt as such from in- come tax 32, 45 War-profits and excess- profits tax 86 Philippine Islands, income tax in 67, 208 Pipe-line oil transportation 100, 102 Playing cards 180 Political subdivisions of United States: Income of is exempt from income tax 22 Porto Rico, income tax in. . 67, 208 Postal rates, first-class re- duced 209 Powers of attorney 179 Prewar period defined 73 234 Re 7EK UE Act Page Produce, sales of on ex- change 177 Prohibition, distilled spirits in warehouse during 107-109 Promissory notes 178 Property, gain or loss from exchange of ,. . 11 Proxies 179 Pullman service 100 Radio messages 100 Receipts for taxes 62 Refunds 62, 194, 197 Regulations, authority to make 193 Reorganizations, war-profits and excess-profits tax on 82-84 Repealing sections 207 Returns : 200 Acknowledgment 193 Accounting period changed 41 Brokers' 64 By collectors 200 Consolidated 55-57 Corporation 54 Dividends paid 64 Excise tax 148, 151 Fiduciary 40 Individual 39 Information at source 64 Information by brokers 64 Inspection of 65 Partnership 40 Public records 65 Time and place of filing. .42, 67 Understatements 42 War-profits and excess- profits tax 86 Riding academies 158 Sales : Mines, oil and gas wells. .19, 86 Property, basis of gain or loss 11 Saving clause 208 Season tickets, railway, for trips of less than 30 miles 100 Ship brokers 156 Shooting galleries 158 Snuff (see Tobacco) 135-136 Soda fountains (see Bever- ages) 131 Soft drinks (see Beverages) 131 Source: Returns of information... 64 Withholding 36, 63 Page Special taxes: Amusement places 157 Automobiles rented for hire 158 Boats, pleasure 160 Bowling alleys and billiard rooms 158 Brewers, distillers and li- quor dealers 158 Brokers 155 Capital stock tax: 154 Domestic corporations.. 154 Exemptions 154 Foreign corporations ... 154 Insurance companies. . . . 156 Cigar manufacturers 159 Cigarette manufacturers . . 160 Circuses 157 Concert halls, tlieatres, etc. 156 Corporations 164 Credit for taxes: Assessed under Revenue Act of 1916 161 Assessed under Revenue Act of 1917 161 Customshouse brokers .... 166 Dealers in drugs 162 Exhibitions and shows 157 Harrison Narcotic Act amended 162-168 Passenger autos rented for hire 158 Pawnbrokers 166 Penalties 162 Pleasure boats 160 Public exhibitions or shows 157 Repeal of prior acts 168 Riding academies 158 Ship brokers 166 Shooting galleries 158 Theatres, museums, con- cert halls, etc 156 Tobacco manufacturers... . 159 Stamp taxes : 170 Administrative provisions.. 170 Bonds of indebtedness .... 174 Bonds, indemnity and surety 174 Cancellation of stamps .... 172 Capital stock: Issue of 176 Sales or transfers of 175 Conveyances 179 Drafts or checks, time.... 178 Exemptions 170 Entry of goods at customs house 179 Entry for withdrawals . . . 179 Index 235 Page Stamp taxes — continued Insurance policies 180 Parcels post 180 Passage tickets 179 Penalties 171 Playing cards 180 Power of attorney 179 Produce, sales of, on ex- change 177 Promissory noteij 178 Proxy 179 Restamping 197 Stamps, distribution and sale 172-174 Stamps, who shall affix... 181 Stateroom service 100 Statistics of income tax 66 Stock dividends, taxable 10 Stock exchanged in reorgani- zations 11 Suits for collection of tax 60 Sureties on bonds 205 Surtax on individuals: 16-19 Undistributed profits sub- ject to 35 Tangible property defined ... 77 Taxable year defined 8 Taxes: Credit for foreign 38, 63 Deductible from income. .24, 48 Payment of 57, 197 Withholding at source . . .36, 53 "Tax-free covenant" bond interest, withholding at source 36, 53 Telegraph and telephone ser- vice 101 Theatres, museums and con- cert halls 156 Titles of Revenue Acts 209 Tobacco : 133 Cigarettes 133, 134 Cigarette paper and tubes 136 Cigars 133 Floor taxes 136 Leaf tobacco, dealers in 137-140 Packages, regulations gov- erning 134-135 Penalties 137 Snuff 135 Tobacco 135 Tobacco manufacturers 159 Transfers of stock 175 Transportation and other facilities 99-104 Express 99 Freight 99 Page Transportation and other fa- cilities — continued Governmental exemption.. 101 Incidental services for hire 102 Mileage books 101 Oil 100 Passenger 99 Penalty for overdue tax.. 104 Pipe line transmission .... 100 Pullman accommodations . . 100 Returns, payment and re- funds 103 Telegraph, telephone, cable and radio service... 100 Trusts, income tax on (see Income Tax, Estates and Trusts) 32-34 Understatements in returns. 42 Undistributed profits subject to surtax 35 United States, definition of. 6 Violations, reporting of 199 Virgin Islands 190 War-profits and excess- profits tax : 69 Applies only to corpora- tions 69 Assessment on basis of representative cor- porations 80 Assets: Admissible 77 Inadmissible 77, 79 Transfers 84 Borrowed capital 77 Changes of ownership 84 Consolidations 82 Credit for tax paid under Revenue Act of 1917 85 Credits : Excess-profits 75 War-profits 74 Definitions : 69 Admissible assets 77 Borrowed capital 77 Inadmissible assets 77 Intangible property 77 Prewar period 73 Tangible property 77 Exceptional cases 80, 82 Exempt corporations 73 Fiscal year: Beginning in 1917 and ending in 1918 85 Beginning in 1918 and ending in 1919 85 236 Revenue Act Page War-profits and excess-profits tax — continued Fiscal year — continued Partnerships and per- sonal service corpo- rations 86 Foreign corporations .... 76, 80 Gold production, exemp- tion of corporations engaged in 73 Government contracts, cor- porations deriving income from 70 Imposition of tax 69 Income derived both from invested capital and personal service 72 Invested capital : 77 Average 79 Average of prewar pe- riod 79 Deduction of inadmissi- ble assets 79 Definitions 77 Exceptional cases 80, 82 Items included 78 Items not included 79 Representative corpora- tions 80 Limitation on maximum amount of tax 72 Mines and oil or gas wells, profits from sale of. 80 Net income: Average prewar 76 For 1911, 1912, and 1913 76 For taxable year 76 Partnership, when taxed as corporation 83 PartnersWps not taxable on income earned since January 1, 1918 86 Page War-profits and excess-profits tax — continued Payment of tax 86 Personal service corpora- tion, return 86 Prewar period... 73, 74, 76, 79 Property: Intangible 77,79 Tangible 77,78 Railroads under Federal control 71 Rates for 1918 69 Rates for subsequent years 70 Reorganizations : 82-84 Corporations 82 Partnerships as corpora- tions 83 Transfer of assets 84 Returns 86 Specific exemption for pe- riod of less than 12 months 73 Waters, mineral (see Bever- ages) 131 Wells and mines, profits from sale of: Income tax 19 War-profits and excess- profits tax 86 Wines (see Distilled Spirits) 117, 126 Withholding agent defined. . . 8 Withholding at source : Foreign corporations .... 53 Non-resident aliens 36 "Tax-free covenant" bond interest 36 Workmen's Compensation Acts, income re- ceived under, exempt 22 National Bank of Commerce in New York ESTABLISHED 1839 J. Ho^pvard Ardrcy Guy Emerson Herbert P. Howell H. P. Barrand A. F. Broderick L. P. Christenson Gaston L. Gtegan John J. Keenan President James S. Alexander Vice-Presidents R. G. HutcKins, Jr. Louis A. Keidel D. H. G. Penny Cashier RicKard W. Saunders Assistant Cashiers Edward W. McDonald A. F. Maxwell Don L. Moore A. J. Oxenham R. H. Passmore Everett E. Risley JoKn E. Rovensky Faris R. Russell Stevenson E. Ward William M. St. John H. ^V. Schrader E. A. Schroeder R. E. Stack H. C. Stevens Statement of Condition December 31, 1918 RESOURCES Loans and Discounts -__---- $230,866,965.23 Overdrafts, secured and unsecured ----- 294,513.86 U. S. Liberty Bonds, U. S. Certificates of Indebtedness and Loans secured by U. S. Liberty Bonds - - - 142,670,748.87 Other Bonds and Securities ------ 8,930,113.30 Stock of Federal Reserve Bank ----- 1,200,000.00 U. S. and Other Bonds borrowed ----- 23,798,375.00 Bonds Loaned -------- 50,000.00 Banking House -------- 2,000,000.00 Due from Banks and Bankers ------ 3,184,655.58 Checks and other cash items ------ 1,673,805.31 Exchanges for Clearing House _ _ - - - 68,767,500.20 Cash in Vault and Net Amount due from Federal Reserve Bank -..------- 47,165,620,03 Interest Accrued -_------ 1,586,840.75 Customers' Obligations a/c Bank's Contingent Liability - 340,000.00 Customers' Liability under Letters of Credit and Acceptances 38,430,535.86 1570,959,673.99 LIABILITIES Capital Stock paid in ------- $25,000,000.00 Surplus Fund -------- 15,000,000.00 Undivided Profits, less expenses and taxes paid - - 9,607,785.92 Reserved for Taxes, etc. ------ 3,102,476.83 Dividend Payable January 2, 1919 - - - - - 625,000.00 Dividends unpaid -------- 14,930.00 Letters of Credit - 11,239,328.75 Acceptances executed for Customers _ - - - 29,843,013.21 Deposits - 416,013,116.05 U. S. and Other Bonds borrowed 23,798,375.00 Unearned Discount 1,407,033.59 Bills Payable with Federal Reserve Bank - - - 33,000,000.00 Time Drafts of this Bank Outstanding . . - - 1,383,750.00 Liabilities other than those above stated - - - ^- 924,864.64 $570,959,673.99 UNR^ERSITY OF CALIFORNIA LIBRARY, BERKELEY THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW Books not returned on time are subject to a fine of 50c per volume after tfie third day overdue, increasing to $1.00 per volume after the sixth day. Books not in demand may be renewed if application is made before expiration of loan period. f 'O^f AUIa 82 V^ ^AY d ^% SEP 121931 20m-ll,'20 39320a ft! (^ UNIVERSITY OF CALIFORNIA LIBRARY